Making the Impossible Possible

Although everyone is different, when people start a journey to achieve financial freedom, they tend to follow a fairly predictable path. Embarrassment about debt is one of the common reasons that pushes people to look for a better way. The idea of ridding themselves of debt sounds amazing. For some, it may seem like a dream, but millions of other people have done it. So, they sit down and total up their debt. And then their heart sinks. What seemed like an amazing possibility only moments before now seems impossible.

"How can anyone pay off this much debt?" is a frequently asked question. Yet, by listening to Dave Ramsey podcasts, it's clear that people are doing it. Psychologically, a huge obstacle just appeared in your path. However, much of the stress this mountain of debt will cause you comes from uncertainty. In this case, numbers can really be your friend.

When people first start their debt-free journey, they are usually living paycheck to paycheck. So $15,000 or $25,000 or even $50,000 in debt seems insurmountable. What do you do once you know your total debt? It's time to figure out how long it's going to take you to get out of debt. This number can really help motivate you to go forward. What seemed like an impossible task now has an actual end date on it.

This calculation doesn't have to be overly complicated. Although it's not technically correct, you can simply divide your total debt amount by the size of payments you can make towards debt. So, if you can make $1000 payments (minimum and extra included) per month and you have $25,000 in debt, it's going to take you approximately 2 years to pay that debt off. The actual number will be different, but this is a decent starting point.

For some of you, this number may be encouraging. You may see 18 or 24 months as your length of time. Others may see 4-5 years. This is where I like to flip the equation. Instead of starting with how much extra you could put towards debt, I like to figure out how much extra you would need to put towards it to pay it off in a certain amount of time. To illustrate, when my wife and I first sat down and figured out our numbers, we calculated that it would take 3 years for us to pay off our debt. Now, that's doable, but the reality of paying off debt is that shorter is better. The longer it takes, the more likely you are to get discouraged and give up. So, we decided we would really like to do it 2 years. We redid the calculation using 2 years as the goal. That told us how much debt we would need to pay off every month. We compared that to how much our current budget said we could. Light at the end of the tunnel: it's usually not that much more. In our case, $400 dollars more per month would change our debt payoff timeline from 3 year to 2. That's only $100 a week, so we started looking for ways to some up with that money.

If you want a little more positivity, it actually only took us 18 months. Once we got started, it felt so good that we worked even more and cut even deeper into our budget to accelerate the process. For me, and many others who have started this journey, putting numbers to our situation took away much of the magnitude. It cut that possible task down to size and helped us realize that it was, in fact, possible.