Getting out of debt is hard. No kidding you say. I’m taking my time to read this blog to get this kind of obvious wisdom???
The average person going through Dave Ramsey’s Financial Peace University is able to pay off all their debts except their house in approximately 18-24 months. Depending on where you are financially, 18-24 months might sound encouraging or it might seem like a pipe dream.
One of the issues though in getting out of debt is that when you are in the midst of that 18-24 months sometimes it starts to feel like 18-24 years. No matter how on fire you are to get out, you will likely reach a point where you start to feel discouraged.
In our personal journey it actually took us a little over 30 months to get out of debt. Guess that makes us above average! One of the things I did very early on was create a very simple little spreadsheet where each month I simply tracked what the remaining balance was on each one of our debts. I confess I had no particular plan when I first started this beyond just keeping track from month to month of how much debt was left.
Here is what I found though. About a year or so in I started to feel like this whole process was never going to end. It started to feel very frustrating and at times I wondered if we were even making any progress at all. Down deep I knew were gradually getting healthier financially from month to month but there were days where it sure didn’t feel like it.
It was in these times that I discovered the real power of tracking. You see the problem is we tend to forget where we have come from. When I’d start to feel discouraged, I’d go back to that spreadsheet and look back at where we stood 6 months or a year before, and I’d suddenly realize just how much progress we were actually making. That spreadsheet was a big reason why we were able to actually finish the process.
Here are a couple of ideas on how to track.
1. A simple spreadsheet
The easiest way is to create a simple spreadsheet. This could be a spreadsheet using a program like Microsoft Excel or it could simply be a piece of paper in a notebook. There is no need to make this particularly complicated. Down the one side list your debts smallest to largest just like the debt snowball. Then across the top list the dates. Then each month simply record the remaining monthly balance on each debt. Repeat this faithfully each month. When you start to feel discouraged just look back at what the balances were 6 months or a year before and I think you’ll be surprised to find you are making more progress than you realized.
2. Make a visual diagram
This works really well when paying off large items like a house. Draw a picture of your house. Doesn’t have to be a perfect to scale drawing like an architect’s, but make it as roughly similar to the floor plan of your house as you can. Then lightly draw a grid pattern over top of your drawing or you could even possibly make your drawing on graph paper.
Now let’s say you own $200,000 on your home. You could draw a grid with 10 rows and 40 columns over your house. That would give you 400 individual squares. Each square then would represent $500 as $200,000 / 400 squares equals $500.
Now you hang up that picture in a prominent place where you will see it everyday. Each time you knock another $500 off your principal you color in another square. Make an extra $1000 payment on the principal, all right, we get to color in 2 more squares. Maybe you might even have a little mini-celebration each time you get another room completely colored in. Woo hoo! The spare bedroom is done. On to the family room!! Make a game of it. This is a great way to involve your kids too, as it enables them to visualize your debt repayment in a very tangible and understandable way.
You could adapt this to many things. Draw a picture of your car. We have a fender, a tire, and the back window paid for! We’re on our way!! Paying off college loans? Maybe draw a picture of some landmark from your school. Doing the Dave Ramsey snowball? Draw a great big snowman and color it in as you make progress. Or maybe a drawing of the Liberty Bell and color in the squares as you are making your progress toward freedom!! You can get as creative as you want with this. Have fun with it.
The point is to track in some fashion. Chances are if you are going to be spending more than a few months paying off your debts at some point you’ll start to feel a little discouraged. That’s where being able to look back a few months to see how far you’ve come, or to see how much of your picture is colored in will really help you to stay on track.