I’m Seeing Things
I am a power consumer of personal finance podcasts. I like to think of it as professional development, but if I am being honest, sometimes the motivation is to find opportunities to say, “Well, if you had asked me, I would have given better advice than that.” (I can be petty; I own that.) But more often than not, I do hear little gems of wisdom, and this is one that I picked up from Gina Zakaria, aka the Saving Whiz, about debt.
But first, a bit of background. I am not big on debt shaming. There are all kinds of reasons that people get into debt and while it is true that some reasons are objectively better than others, if you are in a state where you have internalized that your debt load is a problem for you and are looking to move on, I am not one to punish you for your past “sins.” Yes, we need to understand how you came to be in your situation (so that it can be avoided going forward), but we need not attach any moral value to your predicament.
Which brings us to Ms. Zakaria’s sage wisdom. She advises that on a sheet of paper, you list all of your monthly debt payments. Then, in the next column, write down what you would do with each specific sum of money if you did not have to send it to, let us say, MasterCard. Would that $200 payment each month go into a savings or retirement account? Would your $400 car payment be transformed into a vacation or down payment fund? Would you have a monthly spa day or fancy dinner out with what used to be your Visa card payment? No judgment.
The point of the exercise is to encourage you to tangibly visualize what your life could look like if you did not have the weight of debt around your neck. What are the different choices that you would make if you had fewer monthly obligations? Would you change careers? Take a travel sabbatical?
Obviously, this is an exercise with limits. Most likely your largest ongoing debt obligation is your housing payment (mortgage or lease agreement); for all but the most FIRE-est, going completely “debt free” may not be a realistic — or perhaps even desirable — prospect. The question that you will answer in Column B is not, “What would I do if I didn’t have to pay rent/mortgage at all?” Instead, the question is, “How much less am I willing to pay?”
That may seem like a strange formulation of the question, but here’s the thought exercise: Do you like your home (the physical building, the neighborhood, the city) so much so that you are happy to pay that amount each month? Or are you actually willing to sacrifice something (space, location, security) in order to pay less and reallocate part of that monthly nut to another Column B goal? If the answer is, “I really like my house, thank you very much!” then pat yourself on the back for a job well done. You have found your (not necessarily forever; that’s way too much pressure) home.
And that’s it. That’s your task for the month if debt is weighing on your mind. See your life without it.
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