Financial gurus too often assume that a perfect plan is the best way to achieve a goal like paying down debt. In an imaginary world with unlimited self-control and no obstacles, that advice is useful.
Back in reality, many of us get discouraged when we fall short of our ambitions. The more perfectionist you are, the worse this problem becomes.
When the unexpected strikes, and it always does, you should be able to pick yourself up and keep your plan moving along in the right direction.
You don’t want to throw in the towel just because you had to rely on a credit card in a particular week. That’s an excuse to wallow in self-pity and blow your budget even more. You don’t want to do that because the more you allow yourself to quit, the more that quitting becomes a habit.
Your real goal is to become a person who is reliable in your financial plans. You want a consistent track record and a resilient personality. In the long run, that’s worth way more than trying to achieve perfection in a single week or even a single month.
Let’s examine some practical ways you can make your debt payoff plan more resilient.
1. Create an emergency fund buffer. Having a financial buffer provides the emotional ballast you need to stay calm when things go wrong. If you don’t already have one, start setting aside a modest emergency fund so that when life goes sideways, you aren’t forced to take your eye off of your debt payoff plan, or worse, add to your debt.
2. Account for variability in your budget. One problem with many budgets is that they don’t account for anything unexpected. If your budget only accounts for your expected bills, then any unexpected or forgotten expense will feel like a matter of life and death. Consider a more variable model of spending. For example, you could set aside a small share of your income each month in a slush fund to account for those surprises. That way you have a plan for when life happens, and it doesn’t feel like you’re blowing your budget.
3. Leave room for fun in your plan. A final problem with many debt payoff plans is that they forget to be human. The fact is, you are not a robot – you have emotions and sometimes you get tired or frustrated. When that happens, you’re likely to resort to whatever has helped you in the past feel better. If you don’t account for this, you’re almost certainly going to revert to old, bad habits. Don’t leave it to chance, and don’t count on your willpower alone. Instead, build into your plan space for weekly rewards. This could be in the form of an entertainment budget or a fun fund. Just make sure it’s something you’re looking forward to each week.
4. Consider a variable rate debt payoff plan. No matter how great your plan is, life is still going to throw you curveballs. In those cases, you shouldn’t feel like your only option is to go all-in on the curveball and let your debt plan completely be squashed. Somehow, you have to keep that plan going, even if it’s only a trickle of progress. One more option is a constantly varying rate of progress. For example, see if you can pay down an average amount you can afford each month over the course of the entire year, but allow yourself to adjust how much you pay each month depending on other circumstances. If you’re allowed to make smaller payments on months with more expenses, and larger payments when things are going better, you will feel a lot less stressed along the way, and perhaps even enjoy the journey a little more.