Could Slow and Steady Be a Better Way to Pay Off Debt?

When you have a lot of debt, the first reaction is to decide to pay it off as quickly as possible.

In some cases, making the radical changes necessary to pay off your debt very quickly can, in fact, allow you to stay out of debt. However, sometimes recklessly paying down debt as fast as possible results in a return to the same problems you had before.

To avoid falling back into the trap of continued debt (and, according to the Bankruptcy Data Project, about 1/3 of filers are in just as bad a place after filing), slow and steady can be one of the best ways to proceed.

Straining Yourself to Pay Off Debt

Are you straining yourself to pay off debt? One of the issues with putting all of your available funds into debt repayment is the fact that you don’t leave a cushion to deal with unexpected expenses.

Just after I married, my husband and I aggressively paid down debt. We made it our priority. However, we didn’t set aside any savings for other purposes. When it came time to move across the country for grad school, all that happened was that all of the debt we had paid off was reinstated on the credit cards we used to pay our moving costs.  If we’d read the Citi Double Cash reviews we might have been tempted to switch so that at least when we did have to use a credit card, we’d be getting something out of it that could help us further pay off debt.

We spent some time tackling that credit card debt aggressively, only to end up moving across the country again. I was frustrated. We had a weekly grocery budget of $20 a week, and the thermostat in the house was turned down low enough that we wore layers of clothing in the winter. Everything extra we had was going toward debt repayment. But we weren’t making any headway because the moment an unexpected expense showed up, we had to use debt to cover it.

Once we stopped straining our budget to pay off the debt, and once we started planning for a cushion, things went better. We were able to make solid changes in some of our habits, and we didn’t end up scrambling if an unexpected expense cropped up.

No, we didn’t pay off our debt in a year. But the slow and steady approach ensured that we paid off the debt and were able to remain debt free.

Set Up Reasonable Expectations

In some cases, you can’t expect to change all of your financial habits overnight. In fact, most of us need weeks — or months — to make lasting changes. If you go on a “spending diet” in the name of paying off your debt as quickly as possible, it can be easy to get back into debt once the diet is done and your credit cards are paid off.

It’s a lot like more traditional dieting with food. You can get caught in a cycle of restricting your spending to the point that, when you lift the restrictions after the debt is paid off, you go crazy with spending in celebration. You’ll end up right back where you started.

Instead, consider making gradual changes, and adjusting your spending and debt pay down realistically. It might take more time, but you could see better long-term success.

What do you think? Could slow and steady work for you?

Photo: Images of Money

About the Author

Miranda writes about financial topics for several web sites. Her blog is Planting Money Seeds, and her book, Confessions of a Professional Blogger, is available on Amazon.