Is there really the best time to pay off debt? I believe the sooner, the better. Avoiding debt altogether puts you in the best position to save and build wealth.
Now that's easier said than done. Many of us have never had formal financial education, and we live in an instant gratification social media-driven type of world. In fact, never having a good handle on our finances and living beyond our means for years was the primary cause for us accumulating over $100,000 worth of consumer debt.
It's a cycle we have broken for ourselves, and we have set our sights on our three children. To better education them from the start of their financial lives, so they don't repeat our mistakes.
There are a few simple keys to breaking and avoid debt habits, and once mastered your financial lives, and overall life can get a whole lot easier without the burden of financial stress hanging over your head.
Breaking the Debt Cycle
Everyone's personal situation is different. Let's face it we all don't make the same money, pay the same for food, gas, have the same spending habits, etc. We all have different living arraignments, family sizes, amounts of debt. There's no one size fits all solution that can be applied, but in general, if you learn some universal personal finance principles, and apply some self-discipline, you can make them work for you.
Understand Your Numbers – You don't have to call it a budget if you don't want to, but you do need to know your numbers. Income, expenses and outstanding debt. Grab a piece of paper and get all your numbers down. It's the first step in understanding your overall financial big picture.
Stop Adding New Debt – If you have debt stop adding new debt immediately. This might be tough to break the habit, but into order to be successful with your money, you have to reverse this trend.
Have Some Cash – What's the saying “Cash is king” Having cash on hand for emergencies prevents you from adding any new debt and makes it easier to pay off debt. It's one of the basic keys to be successful with money. Start small with $500-$1000, and grow your cash savings over time.
By organizing yourself and following these three basic keys, you can set yourself up for future success with your money.
Changing Your Debt Mindset
The bigger hurdle you may face in paying off debt is yourself, and your habits. My family and I fell into this trap for years. We thought it was okay to use credit cards to buy things we didn't have the cash for. That most everyone had debt, and it was okay for us to have it too. If we could manage the minimum payment each month, then we would be okay, and it seems like a logical financial plan.
It took a rock-bottom moment and being out of borrowing options to finally face our debt problem, which was really a behavior and mindset problem.
Once we came to terms with that and adjusted our way of thinking towards our money we were able to turn things around quickly. In as little as three months we went from having no financial plan to having a budget and feeling less stressed.
We stopped our stinking thinking, and took ownership of our action (spending habits) we started to live within our means. Once we had a clear blueprint for our money, we began to involve our three children. We wanted them to understand all the changes that would be happening in our household, but also learn from our mistakes.
Final Thoughts on The Best Time to Pay Off Debt
A friend mentions to me recently about teaching kids about personal finance and a quote he's heard before, and it goes something like this…it better to build a boy, then fix a man.
That's resonated with me. I much rather have our kids learn some personal finances basics now, then take on the burden of debt and learn the hard way. We are working hard with our three children to teach them better than we knew at their age about money. My wife and I want them to learn from our past money mistakes. We want them to have the best start to their financial lives as possible. It's an initiative I'm hopeful others will pick up on too.
So is there really the best time to pay off debt? That question is really up to you, but I think you know my answer to that question by now.
If you need any help, please let me know.
Brian is a dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013 who, with his family, has successfully paid off over $100K worth of consumer debt. I want my three children to handle money better than I ever did at a young age. I have been teaching them as much as I can for the last 10 years. My goal is to continue to champion the financial literacy message and then why I created the “How To Rock Your Money” book. To help teenagers navigate their financial futures. I hope my family’s story of paying off over $100,000 worth of debt will inspire and motivate you to take control of your money. He blogs at BrianBrandow.com