Sarah Li Cain
Contributing Writer at Tally
February 20, 2019
Getting into and out of debt is not always putting logic to numbers. If you look at it from purely a number’s perspective, it’s about paying more than the minimum and making sure you spend less than you make.
But you and I both know it’s not that simple.
The truth is, getting in and out of debt requires us to navigate a lot of tricky emotions. Being debt-free (or close to it) is exciting, but if you don’t address the emotions and underlying reasons of why you got into debt in the first place, your problems are far from over.
Take me, for example. I grew up around accountants and learned how to do bookkeeping for a small business at a very young age. I saw what mismanaging money can do to someone’s financial life, and yet I still got into debt in my mid-20s because I was chasing my ultimate version of a romantic relationship. It wasn’t until I addressed those feelings that I could pay off my debt in a matter of months.
If you’re in a bunch of debt, it’s important to dig deeper into the reasons you may have mismanaged your money. It’s not about nitpicking every single bad decision you made. Rather, it’s about taking the time to assess the reasons you got into debt and why you're spending more than you can afford.
Here’s the catch: It requires you to look at your numbers and — gasp! — actually consider how you feel about them. It may not be comfortable, but I promise you it’s worth it.
For many people, spending money is a way to cope with stress. Think happy hours and retail therapy. These types of activities exist because we feel like we need an escape from our work lives.
While it's fine to go out for drinks every once in a while and vent about your boss or an annoying co-worker, constantly spending money as a coping mechanism makes for poor spending habits that will get you further into credit card debt.
Our default mode of action is to run away from negative feelings. Of course, we want to feel good! But allowing ourselves to process those feelings in a healthy way will ensure that we don't get caught in the trap of feeling like we need to spend money to feel better.
When I admitted I had a spending problem, I realized the purchases I made were to make others happy. I purchased items thinking I would look cool. Looking back, I spent thousands of dollars trying to impress people I don’t even keep in touch with anymore.
Keeping up with Joneses is normal, especially when there are so many ways to compare ourselves to others. Sure, we can blame social media for all of it, but we can choose to react differently. If feelings of unworthiness come up, spending money won’t make it go away.
Instead of looking outward, look inside and find what truly makes you happy. It requires intense self-reflection and scrutinizing every purchase. However, most of us, deep down, know what will make us happy.
"If you’re in a bunch of debt, it’s important to dig deeper into the reasons you may have mismanaged your money."
For many, it’s spending time with loved ones and feeling a sense of purpose. Both these things don’t require as much money as you think. Next time you feel like you need to buy something because someone else has it, it could be a sign you need to dig deeper into what lights you up.
It sounds hard to believe, but spending too little can also lead to debt. As in, you feel bad you're spending any money aside from the necessities, so you end up rebelling and overspending. Then, you feel guilty or ashamed, and the debt cycle starts again. Next thing you know, you check your credit cards and realize your last shopping trip landed you in the red.
Even if you're in debt now, don't feel like you need to punish yourself. Because guess what? When you're debt-free and all of your hard-earned income is free for you to use, you can spend on the things that are important to you.
Using money to make yourself feel good is fine, as long as you do it moderation. Think of your spending like a diet: It's OK to have cheat days. If you like getting your nails done, head to a beauty school where it's a fraction of the price. If you devour books, give yourself permission to buy one a month.
Feeling a sense of fear or panic when it comes to seeing how much you really owe is normal. Maybe you don't know how much you really owe, or you can't afford the monthly payments to your creditor. Perhaps you want to make a big life change - buying a house, starting a family - and you can't afford to do it because you're so overwhelmed at the thought of spending more money beyond your standard living expenses.
When I was using my credit card to pay for vacations, I knew deep down I was digging myself into a hole. My wake-up call came when I finally dared to look at my credit card statement and realized I was $9,000 in debt.
Unfortunately, it's poor spending habits such as these that can lead to other financial roadblocks — a bad credit score, high interest rate loans, multiple debts — and keep you feeling like you're in a debt cycle that’s holding you back from achieving your financial goals. To break out of this debt trap and get on the path toward financial security, here are some steps you can take:
Know how much debt you have and make a budget
Stop spending on credit
Start making your minimum payment
Consider a balance transfer credit card or
Use a credit card payoff app
Don't let paying off your household debt and becoming debt free stop you from continuing your good habits though! It's important that once you achieve financial freedom, you start to put money away into a savings account for a rainy day or emergency fund. Setting up and contributing to accounts like these can be the difference between being able to make those big life changes mentioned before and falling back into personal debt.
It doesn’t matter how you got into debt. If you don’t know the details of your financial situation, you can’t begin to understand how the debt came to be or take action to ensure it never happens again.
Yes, it means grabbing your credit card statements and adding up how much you owe. Remember, these numbers represent financial decisions you thought were best for you at the time. It’s in no way a judgement call on who you are as a person.
Once you know where you stand financially and make a plan (including dealing with those pesky emotions), you can then start to address the reasons you got into debt in the first place. When you take steps to get rid of the debt once and for all, you’ll feel like a weight’s been taken off your shoulders.