Have You Ever Tasted Elephant?

How do you eat an elephant? One bite at a time.

If you’re reading this, you either have a huge freaking money mess or you know someone who does. The average American owes more than $200,000 (in mid-2015) on a median household income of $55,000. This puts our average debt to income ratio at 370%, which is worse than the citizens of the floundering country of Greece!

While you may have more or less debt than the figures listed above, you already know how to fix it. The solution is as stupid simple as paying the debt off, one bill at a time.

That sounds elementary, so why aren’t most people paying debt off and destroying this massive burden? I believe the problem is that it’s too hard to rationalize paying off something so huge. Our culture demands we buy cars that are too expensive to impress people we don’t really care about, and buy houses that are way out of our price range. In short, most people spend more than they take in to maintain an unsustainable lifestyle because they don’t really believe they will ever have financial independence from debt.

Before you take that first bite of elephant, you (and your spouse) have to have a “why.” If you don’t have a reason to be free from the monolith, your meager attempts to pay stuff off will never be successful. You have to personalize your “why.” Our reason for eliminating debt was so that we could have freedom. Pretty simple, but now that we have freedom, we will never go back to slavery. We wanted to be free of the stress that comes with having massive debt. According to a recent survey by the American Psychological Association, money remains the highest cause of stress, beating out work, family responsibilities, and even health concerns. If you want to beat back debt, come up with a “why” that will give you the motivation to keep fighting when things get hard- trust me they will.

Many financial advisers, along with our own personal experience has taught us that paying off debt requires systematic and diligent action. You need to write down all your debts and know how big the beast is. When it comes time to take action, focus first on the small debts and pay whatever you can every month. Don’t wimp out when you see something at Target, or entertain the thought of a new car. You can go on that shopping spree or upgrade your car after you’re free. Sacrifice now, so that you can live financially independent later.

I’ll admit it, elephant tastes like crap. Paying off your debt isn’t fun, but it’s always worth it. Once you start paying stuff off, you start to see the results and the motivation really kicks in. This huge beast doesn’t seem so indestructible after all.

While being debt free and having no payments is awesome, a home mortgage is the one debt that we view a little differently. Consumer debt (like a car, credit card, etc.) is toxic to your financial independence, but having a home mortgage shouldn’t be approached with a scorched earth methodology as this is considered an investment. Instead, plan to shorten the length of your home loan. Paying an extra payment every year will knock years and thousands off the mortgage.

We knocked down our debt, one bite at a time. Now it’s your turn. Was this your strategy to pay down debt? Are you working on becoming debt free? Share your story in the comments below!