A refreshing perspective from a seasoned ‘money guy’ who shares sound financial strategies for debt relief and vibrant living.
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Have you ever felt absolutely overwhelmed by the burden of debt? You are not alone.
Debt is a pervasively significant stressor with household debt in the U.S. recently reaching record levels surpassing $14 trillion.
And while managing and reducing financial stress is a core tenet of wellbeing, it can get overlooked in schedules laden with responsibilities, especially when remaining personal time has already been allocated to self-care activities like yoga classes, self-help books and happy thoughts.
I wrote this piece as a pathway to reducing debt while prioritizing wellbeing to help you set your Best Self free with a holistic approach.
Whether you’re facing credit card balances, student loans, auto loans, or mortgages, monthly debt payments collectively impact almost everyone regardless of age and other socioeconomic factors. And when debt balances grow to a point where you’re barely managing to meet minimum monthly payment requirements, it can feel crushing for anyone from college graduates entering the workforce to senior citizens living on a fixed income.
While society sometimes associates being in debt with extravagant lifestyles or irresponsible consumerism, for many the path into debt is much more innocent. Unemployment, unforeseen medical expenses and financially assisting a family member or friend in need are a few circumstances that could lead even the most well-intentioned person into the monthly debt cycle.
As for the rest of us, we’ve all made financial, professional or relationship decisions that we wish we could take back or at least handled differently. But here’s the thing…
Your debts do not define you.
What to do:
Pay yourself first.
Of course, we’ll address an approach to tackling the financial impact of your debt, but let’s first focus on something much more important than monthly payments and statements.
I’m referring to paying (valuing) you, the person, regardless of your current financial situation.
How to do it:
- Make a list of any and all people that bring happiness into your life. Write down the friends who are empathetic listeners, those who have your back no matter what and the ones who make you laugh or are simply fun to be around. Plan a visit, meet for lunch, see a movie or simply catch up on a phone call.
- Make a second list of activities that YOU perceive as healthy for your mind and body. Walking in a nearby park or around your neighborhood. Lighting a scented candle and meditating. Listening to your favorite music and practicing conscious breathing.
- Make it definite. Schedule these activities in your calendar and start paying yourself first. Every Sunday, for each day of the following week, schedule at least one activity from your lists that you know will bring you happiness. Let it anchor your day. Whatever you face during the course of any day, that special time will be there for you. (NOTE: Your weekly planning day does not have to be Sunday as long as you commit to this exercise every week).
- Make it happen. Be 100% present during each of these daily activities. Don’t fold laundry during the phone chat with your friend on Tuesday evening. Resist the urge to check your smartphone for texts and emails while listening to music and practicing conscious breathing. Prioritize this time and give yourself permission to live in the moment.
Remember this: Your relationships and experiences will define you much more than any debts or investments ever will.
Show Me the Money
Yes, we still need to address the financial aspect of your debts, but now that you’ve first scheduled in self care you will be in a better position to manage your finances. Trust me.
What to do:
Determine which of your non-mortgage debts charge the highest interest rates and prioritize first paying off the card with the highest annual percentage rate (APR), i.e. the card that charges the highest interest rate first. Perhaps it’s a credit card with a double-digit interest rate that you wish would forever disappear from your inbox each month.
How to do it:
Pay the minimum monthly payment on all cards and loans except for the card with the highest APR. All cash that is budgeted and available to pay beyond the minimum balances should be added to the minimum payment on the card with the highest APR.
Illustrative example:
Aspen and Blaine have been best friends since high school and lead very similar financial lives. As a result, Aspen and Blaine have identical credit card rates, balances and minimum monthly payments as presented in the chart below.
Credit Card Rate, Balance and Minimum Payment Summary – Aspen and Blaine
| APR (Interest Rate) | Balance | Minimum Monthly Payment | |
| Credit Card A | 14.25% | $2,846 | $100 |
| Credit Card B | 17.50% | $5,263 | $175 |
| Credit Card C | 21.75% | $1,789 | $75 |
| Total | $9,898 | $350 |
Also, both Aspen and Blaine decided to pay a total of $500 each month toward their credit card balances ($150 more than their total $350 minimum monthly payment requirement) in order to pay off their balances faster.
Up until this month Aspen and Blaine have both been equally allocating their additional $150 in payments above the minimums among their three cards ($50 extra toward each card) as follows:
Credit Card Payments Summary (Last Month) – Aspen and Blaine
| APR (Interest Rate) | Balance | Minimum Monthly Payment | Additional Monthly Payment | Actual Monthly Payment | |
| Credit Card A | 14.25% | $2,846 | $100 | $50 | $150 |
| Credit Card B | 17.50% | $5,263 | $175 | $50 | $225 |
| Credit Card C | 21.75% | $1,789 | $75 | $50 | $125 |
| Total | $9,898 | $350 | $150 | $500 |
This month, while Aspen and Blaine each continued to pay $500 in total toward their credit card balances, they allocated the amount to each card differently. This small adjustment will probably result in one person paying off their debts faster and paying less interest than the other.
Aspen continued to equally allocate the additional $150 in payments above the minimums among the three cards ($50 extra toward each card) as follows:
Credit Card Payments Summary (This Month) – Aspen
| APR (Interest Rate) | Balance | Minimum Monthly Payment | Additional Monthly Payment | Actual Monthly Payment | |
| Credit Card A | 14.25% | $2,846 | $100 | $50 | $150 |
| Credit Card B | 17.50% | $5,263 | $175 | $50 | $225 |
| Credit Card C | 21.75% | $1,789 | $75 | $50 | $125 |
| Total | $9,898 | $350 | $150 | $500 |
Blaine decided to allocate the entire additional $150 in payments above the minimum to Credit Card C (the highest rate card) and pay the minimum amount for Cards A and B as follows:
Credit Card Payments Summary (This Month) – Blaine
| APR (Interest Rate) | Balance | Minimum Monthly Payment | Additional Monthly Payment | Actual Monthly Payment | |
| Credit Card A | 14.25% | $2,846 | $100 | $0 | $100 |
| Credit Card B | 17.50% | $5,263 | $175 | $0 | $175 |
| Credit Card C | 21.75% | $1,789 | $75 | $150 | $225 |
| Total | $9,898 | $350 | $150 | $500 |
Blaine’s approach to paying off her credit card balances is known as the Debt Avalanche Method.
After paying off Credit Card C, Blaine will then allocate all extra debt repayment funds (the ‘Avalanche’ of repayment funds) to Credit Card B, the card with the next highest APR. And after Credit Card B is paid off, then the even larger ‘Avalanche’ will be directed solely on the final target: the remaining balance of Credit Card A.
By first paying off cards with the highest rates, Blaine will probably pay off her credit card debt faster and pay less interest than Aspen without paying a dollar more than Aspen each month.
Paying off Debts with ‘Hidden Cash’
It may be possible for you to add even more towards your next credit card balance payments by identifying overlooked sources of cash. And you can do this without significantly impacting your current lifestyle.
Begin by harvesting cash from the low hanging fruit, i.e, expenses for products and services that you’re not using. These expenses may include one or more of the following:
- Food items that often expire before you consume them.
- Wasted energy (running lights, heat, A/C, music and TV in unoccupied rooms).
- Gym memberships
- Redundant or unused or subscriptions. Premium cable, Netflix, Hulu, and Disney +
Simply review last month’s credit card and bank statements to determine if there are any credit card and debit charges for products or services which you rarely or never use. Cancel those product and service subscriptions immediately and apply the cash savings to your next credit card payment.
Paying off Debts with ‘Money on the Table’
Also, don’t leave money on the table. Identify any ‘untapped’ assets and savings opportunities that could be converted to cash and applied directly or indirectly toward your credit card balances.
- Gift cards: Keep track of expiration dates and balances and use gift cards to pay monthly expenses.
- Uncashed checks: Cash all checks as soon as you receive them and immediately put your money to work for you by either paying down debt or depositing the cash in a high-yield savings account.
- Discount codes and rebates for online purchases (Retailmenot.com, Honey, and Ebates.com): Before you click ‘pay now’ for an online purchase, check these and other discount sites for coupon codes and other offers.
The initial objective is cutting waste, not needs and wants. And by making a few minor adjustments, you can make significant progress toward lessening your debt burden.
Next Steps: Additional Income Streams
Once you’ve eliminated any recurring waste from your expenditures, you may want to further accelerate the debt reduction process. Look for extra ways that you can earn or save some extra money. Consider transforming a hobby into a revenue stream with a side hustle or part-time job.
The point is to generate extra money doing something that already interests you or brings you happiness.
Give some honest thought to your finances each month, and determine how much you can pay above the minimum on your credit card balances. Commit to a number and add that amount to what you have been paying on the credit card with the highest APR (interest rate). Some months may be more challenging than others, but stay the course and you will see progress. And by taking the initiative, you’re living on your terms, responsibly addressing your finances and, most importantly, taking care of yourself.
While tackling your debt is important, be careful not to give debt the power to postpone and distract you from regularly experiencing joy and contentment. By prioritizing and allocating time to self care and your key relationships, you will be on track to gain relief from financial stress and the freedom to be your Best Self.
You may also enjoy Podcast: Jim Brown | True Abundance: One Man’s Search for (Mindful Money) Meaning by Best Self Media
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