Debt Reduction: Steady Progress May Be More Important Than Speed

by Miranda Marquit · 0 comments

When it comes to paying off debt, we are told that we need to get rid of our debt as quickly as possible. However, sometimes we get so wrapped up in speed that we forget that our debt reduction needs to be manageable for the long term.

One of the problems with paying off debt quickly is that it doesn’t really allow for truly changing underlying financial habits — especially if you view everything you do to get rid of your debt as temporary. Research indicates that many people who pay off debt quickly find themselves back in debt again, simply because they feel like they have new freedom to spend.

In some cases, depending on your situation, slower debt reduction can make sense. The idea is to make your debt reduction manageable while you reform your other money habits. That way, when you pay off your debt, you have other financial practices in place to improve your situation.

Paying Off Debt Over Time

When reading stories of consumers who paid of tens of thousands of dollars of debt in less than a year, it can be tempting to think that you need to do that, too. However, that setup doesn’t mean success for everyone. While rapid debt pay down can be effective for some people, it doesn’t always work well for everyone. Here are some of the risks that come when you try extreme debt pay down:

  • Begin to feel deprived. After a while it weighs you down and you might not be able to keep with it. Even if you do manage to finish, there is a chance that you will overreact  and spend your way back into debt because of the freedom you feel — and your desire to “make up” for all the sacrifices you made.
  • Overwhelmed by debt plan: Another problem is that you might feel overwhelmed by the pacing. Sure, you might be able to keep up with the frantic pace for three or four months. But after awhile, it is easy to become overwhelmed, feel like a failure when you can’t manage it one month, and give up altogether.
  • So much focus on debt that other aspects of finances are neglected: Finally, there is the chance that you will focus so much on debt pay down that other aspects of your finances are neglected. You might not have an emergency fund, so a setback could mean more debt.

Yes, you want to get rid of debt. However, sometimes a measured approach is best. Be realistic about what you can use for debt repayment. Additionally, make sure you have some sort of emergency cash cushion so you don’t have to fall back on your credit cards if you need a car repair or some other unexpected expense comes up. If you make steady progress, you will also have the chance to fix the underlying problems that caused your debt in the first place.

Changing your money habits over time so that they become part of your lifestyle is essential if you want to maintain success after you pay off your debt.

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