How to get out of a debt hole

I recently wrote about my encounter with Kelly, whom you may remember as the “drowning” lady. People deep in debt describe themselves as being a mess, a train wreck, a basket case, so I wasn’t all that surprised to get an email from someone who is ‘drowning’. You might assume people who willingly describe their situation as dire are on the right track to financial wellness, but this isn’t always the case. Using descriptive language to illustrate the situation only means so much, what really makes a difference is visualizing being in a bad place. And if you are in moderate to extreme debt, you’re at the bottom of a very deep well.

I couldn’t get Kelly’s situation out of my head last week so I wrote my Indy Star column about her, and people like her, this week.

“When a person is dealing with moderate to severe consumer debt, I find it best for them to picture themselves in a 30 foot hole. Stick with me here. This isn’t as crazy as it may seem. I literally want debt-ridden people to take five minutes or so to visualize themselves in 30 foot wells. The only blue sky they can see is the small circle of blue sky that is directly above them, at the top of the shaft. There is only one way out.” (courtesy of the Indy Star) 

Being stuck in a well would be really uncomfortable, but people adjust to discomfort quickly. And unfortunately what happens is people get kinda comfortable in the hole. Eventually though, the long-term side effects of being in the hole (being in debt) start to motivate the well-dwellers to get out of there. The motivation is the light. The small circle of light brings hope, and every inch they climb upward (every debt paid off) means more light. There will be setbacks, of course. The biggest roadblock often ends up being the person you are in the well with. Miscommunication and arguments will hold you back. Learning to work together is the only way out. But eventually, the combination of time and hard work will pay off, and you’ll be free.

“Debt isn’t fun. It also isn’t evil. Debt simply ties us to our past and obligates our incomes away from our present and our future. Our behavior and our reaction to debt is what tells the story, when it’s all said and done. People often tell me they are “comfortable with debt,” and this terrifies me. Sure, some people have the discipline, organizational skills, and income to support moderate debt payments. But I’ve found many people to be overconfident in their ability to do so.” (courtesy of the Indy Star) 

Then there’s the opposite end of the spectrum, those who are hesitant to pay off debt because they don’t want to spend/”waste” so much money a month. I guess I can see where they are coming from, but they’re wrong. Remember your net worth? It’s super important. It also completely disproves this excuse. If you have 10k in debt and no savings your net worth is -10k. If you received 1k today for no reason and saved it, your net worth would be -9k. Conversely, if you received 1k and make a large payment on your debt, your net worth would -9k. See what I mean? Paying off debt isn’t spending money, it has the exact same impact on your net worth that saving does.

“Getting out of debt is really stinkin’ hard. It requires focus, accountability, and sacrifice. On top of that, it is filled with psychological riddles and exercises of discipline. But once navigated correctly, it can be the true foundation of a great financial life.” (courtesy of the Indy Star) 

Read my full column here. 

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