You've seen them. Those sensational online profiles of people who accomplished massive goals that most of us can only dream of in a ridiculous amount of time. How This 30-Year Old Quit His Job and Became a Millionaire or How This Millennial Bought a Mansion on a $30k salary or How This Couple Paid off $200,000 Worth of Debt in a Year.
Photo by CafeCredit.
These stories are great inspiration porn, but they're typically just as practical as any other "get rich quick" story, which is to say, not very practical.
The "how" part of the story usually boils down to a unique or obvious circumstance: Their parents gave them a large sum of money, they came up with a genius business idea that took off, or they have a job that already pays six figures and then just used that money to pay off their debt. I'm not saying the subjects in these profiles don't work hard, but these headlines suggest some kind of utility for the reader while not really telling us how we can get there, too.
In other words, these stories don't teach us anything useful about money.
But not all "get out of debt" stories are the same, and there are some out there that offer up more honesty, along with practical takeaways. Melanie Lockert, author of Dear Debt, tells her own story of paying off $US80,000 ($101,855) worth of debt, but she didn't do it overnight. It took her several years. And for several years, she was overworked and she battled depression. Lockert tells the brutal truth: Getting out of debt is a struggle.
Cait Flanders paid off $US30,000 ($38,115) worth of debt in two years. That may be quick by some standards, but Flanders made it happen with realistic financial habits (cutting back on spending, using windfalls to pay off large chunks at a time). She also wrote about the reality of being in debt: Wanting to say eff it and give up altogether.
These are the debt stories worth reading because these stories tell you the truth about what it takes to manage your money: Perseverance, outside-the-box thinking and time.
Most realistic get-out-of-debt stories come down to a few habits. And these habits don't involve receiving a massive financial gift from your parents, saving your entire already large salary with another high-earning spouse, or magically conjuring up tens of extra thousands of dollars in income per year. The habits that will help you climb out of debt are more achievable than what you might read about in a clickbait article, but they do take time and effort:
Learning to Be Resourceful
Golden rules of personal finance such as "spend less than you earn" are somewhat unhelpful because, well, duh. As former Lifehacker writer Eric Ravenscraft put it:
The problem with this advice isn't that it's bad, it's that most people already instinctively understand it. That's not to say everyone is good at following it, but instinctively we get it. Why wouldn't we? We've had it beat into our heads since we were in Kindergarten. "If Billy has 10 apples, and he gives away 12, how many of Billy's kneecaps will the loan shark break?" Life, on the other hand, is less intuitive than simple subtraction.
Everyone's situation is different, which is why blanket financial advice isn't always useful. Instead, it's up to you to make the rules work for your own scenario, and that really comes down to resourcefulness: Optimising your resources in a way that benefits you most. This is also much easier said than done, but there are specific ways to hone your resourcefulness.
For one, you can learn to seize opportunities. Windfalls are a perfect example of this. A windfall is an unexpected sum of money that finds its way into your lap, such as an inheritance from a distant relative, perhaps, or a bonus at work. Our natural inclination is usually to spend the windfall. We didn't budget for it anyway, so what's the harm? Nothing, but think of that money as an opportunity to reach your financial goals, such as paying off debt. You can treat yourself, too, but it's resourceful to acknowledge that the opportunity exists. Learn to leverage your luck, in other words.
Learning to Feel in Control
It's hard for most of us to feel in control with money, but from my own experience and from listening to the experiences of others, a sense of control is crucial in getting your finances in order. Especially when you feel defeated, it's important to build an internal locus of control — a belief that your actions can affect your destiny. Here's how to work on it.
Creating small choices for yourself can help with this. Charles Duhigg talks about this concept in his book Smarter Faster Better (we reviewed it here). The idea is to create a choice for yourself, then tie your actions to a larger goal. No, one small choice won't magically get you out of debt, but that isn't really the idea. The idea is that, gradually, making decisions will help you feel powerful. Some examples might be:
- Picking a debt payoff method: The snowball or the stack
- Deciding which areas of your budget to cut back on
- Deciding between an online budgeting tool like Pocketbook or YNAB
It also helps to set meaningful goals and ask yourself why you want to get out of debt in the first place. This way, all of your actions support that goal and ultimately serve you.
Getting Past the Plateau
Finally, one of the toughest hurdles with debt is getting past the plateau stage. When you first make a goal to get out of debt, the novelty is exciting. You're motivated and ready for a change. After a while, you get tired of living below your means and the goal gets boring.
This is when a lot of people go back to their old ways and give up on their goals altogether. There are a few ways to combat it, though. You can set smaller milestones, for example. If it's your goal to pay off $3000 worth of debt a year, break that down to $250 a month or even $60 a week. Thinking about your goals in the shorter term makes them more actionable and present.
Also, as writer James Clear points out, you have to be excited about the process. He explains:
...if you look at the people who are consistently achieving their goals, you start to realise that it's not the events or the results that make them different. It's their commitment to the process. They fall in love with the daily practice, not the individual event.
Fall in love with boredom. Fall in love with repetition and practice. Fall in love with the process of what you do and let the results take care of themselves.
I've found that, during any financial plateau, it also helps to research the next step. If you're paying off debt, that might mean reading a little bit about investing. This keeps you motivated to stay on course with your current goal so you can get to that next step. Plus, it helps ensure you're ready when the time comes.
Paying off debt is not an easy feat, and for most of us it takes time. Get rich quick stories are much more exciting, but they can also undermine all the boring, hard work that it actually takes for most of us to accomplish lofty goals.