3092: Should Repaying Debt Be An Obsession by JD Roth of Get Rich Slowly

[00:00:00] It's a Minimalist Monday edition of Optimal Finance Daily, Should Repaying Debt Be An Obsession by JD Roth of GetRich Slowly.org Some people never take control of their finances because they're afraid that doing so would require them to give up everything they enjoy. I don't believe that's true. Getting out of debt requires hard work and sacrifice, but that doesn't mean you can't have fun along the way.

[00:00:26] Aaron recently sent the following email, quote, You paid off $35,000 of debt in just over three years. Does that mean that you were balls to the wall dedicated and had no frills and were dour faced the whole time? Were you using every spare penny to pay debt? Did you give up all luxuries and all fun? Did paying off the debt consume you?

[00:00:52] That's my greatest fear about the whole thing. What makes it worse is that I'm serious about getting out of debt. I just don't want to be miserable in the process, especially since I'm going to be married soon. Any encouragement you can give would be greatly appreciated, end quote.

[00:01:07] When a person decides to make a lifestyle change, financial or otherwise, there's a temptation to go all out. With the zeal of a new convert, you leap headlong into a life of thrift, for example, giving up everything you valued before.

[00:01:24] There's a problem with this, though. Most people who leap from a lifestyle of deficient spending to one of extreme frugality find the waters very, very cold. It's a shock to the system. It feels oppressive. They struggle to stay afloat, but before long decide they're going to sink rather than swim. So return to the warmer, familiar waters. The waters of debt.

[00:01:52] I made several false starts before I found my way. I would decide to give up comics completely or to never buy another computer game. These sorts of goals are foolish. Nobody has that kind of god-like self-control. Everyone needs an indulgence now and then. Rather than quit cold turkey, I think the best way to begin a life of frugality is by taking small steps.

[00:02:19] Small steps eventually become big strides, but only after you've developed your frugal muscles. Testing the water. When I was working to pay off my debt, I was not obsessed. I did not give up all luxuries and fun. I was dedicated, yes, but debt reduction did not consume me. For much of those three years, I was struggling to figure things out.

[00:02:45] I didn't suddenly move from clueless spender to clued-in saver. It was a gradual process, one that's not even wholly complete today. I started to focus on debt reduction in October 2004. In January 2006, over a year into my quest, I had one of my worst financial months ever. I spent over $1,000 on comic books. I was buying expensive, hardbound compilations.

[00:03:14] I'm also ashamed to admit that, but it's true. For that month, I spent more than I earned. That's an extreme example, though. Most months, I made smart decisions with money and gradually improved my situation. Measures that seemed extreme at the beginning became much easier by the end. When I started to get out of debt, I thought of cable television as a need. By the end of the process, I saw that it was a want. That's just one example.

[00:03:43] I cut back in many areas. But again, these changes did not occur overnight. Finding balance. For some, the gazelle-like intensity espoused by Dave Ramsey is absolutely the right way to go. But I believe the people who succeed with this sort of devotion are those who actually learn to enjoy extreme frugality. They don't feel like they're making sacrifices.

[00:04:10] The rest of us need some sort of balance. In my case, my most austere period came after I had repaid my debt. When I quit my job at the box factory last spring, I spent a few months being too frugal, and I was not happy. It was then that I discovered the balanced money formula, which I've mentioned frequently over the past few months. Yes, adopting this technique helped me to continue saving while also allowing room for fun.

[00:04:39] The same thing can be done while you repay your debt. Yes, you should cut back as much as possible. Yes, thrift and frugality are important tools to meeting your financial goals. But I believe it's important to develop sustainable financial goals. If you're miserable, or if you cut your spending so far that you cannot maintain it, there's a risk that you'll lapse back into old habits. There's no one right path to debt-free living.

[00:05:08] Each of us has different priorities. To find the way that's right for you, you need to set up financial goals, draft a spending plan that moves you in the direction of these goals, and then practice patient persistence. And let yourself have a treat now and then. You just listened to the post titled, Should Repaying Debt Be an Obsession? by J.D. Roth of GetRichSlowly.org.

[00:05:37] I think J.D. makes some great points here about how you can still be successful while gradually learning to spend less. Managing your money is a lifelong journey, so it must be sustainable. But if you are going to go the aggressive route, I wholeheartedly agree that you need to enjoy frugality. I did a complete 180 and was extremely frugal when I got out of 30 grand of debt in 11 months.

[00:06:06] But I never saw it as deprivation. I found it fun to be creative and resourceful about getting my needs met. It all felt like a grand experiment to me. I think one of the things that contributed to my enjoyment was that I spent a lot of time reading about frugality and personal finance. I read every single article on the Mr. Money Mustache blog, as well as a blog called Frugal Woods.

[00:06:32] The books, Your Money or Your Life and The Millionaire Next Door had a profound effect on my mindset. The content I was exposing myself to every day kind of reversed my consumerist conditioning in a way that really changed my desires. It wasn't enough for me to simply spend less. I also wanted to desire less in terms of material possessions.

[00:06:57] It also helped to replace the things I was spending money on with lower cost options versus completely removing them from my life. So, for example, I used to love to go out after work for happy hour and dinner. Being social was how I spent most of my free time. Rather than giving that up, I started hosting elaborate dinner parties at home that were so much fun. Your behaviors are driven by your beliefs.

[00:07:25] So if you're working to radically change the way you spend, that's going to require a deep mindset shift. Listening to this show is a fantastic start. So thank you for joining me today and every day. And that's a wrap for another Monday show. Have a great rest of your day and start to your week. And I'll be back tomorrow as usual, where your optimal life awaits.