NerdWallet reports that the average American household has $132,086 of debt – $15,310 of that on credit cards. Now also consider that the average American household earns $53,657. That’s right – the average level of debt is equal to almost two and a half years’ worth of salary!
It isn’t that people don’t know what to do – everyone has already heard the advice to create a budget, look for ways to save money, limit your spending, and live below your means. But apparently we don’t do it, so the issue isn’t one of lacking knowledge.
What is the reason we Americans are so burdened with debt?
It’s a lack of proper motivation. Dave Ramsey says you need to be “gazelle intense” and focused to get out of debt, and that personal finance is only 20% knowledge but 80% behavior.
Knowing how to get out of debt isn’t nearly as important as why you want to get out of debt. You need the motivation to create a plan and stick to it. You need a big WHY and you need to keep it in mind as you progress through the process.
Maybe one or more of the reasons you want to get out of debt is so that…
– You can pay cash for your children’s college education
– You can have a comfortable retirement
– You can start investing and build wealth
– You can become a stay-home parent to spend more time with your children
There are a lot of great reasons to get out of debt – you need to find your specific reason that motivates you.
Find your “WHY” and then…
Once you’ve clarified your “why” reason, write it down. Things that aren’t written down tend to get forgotten or ignored. Don’t only write it down but once written put it somewhere that you will see it to be reminded on a regular basis.
I’ve heard of some people who have even found pictures of something that represents their big goal to them. They’ll print out this picture and put it on the refrigerator or somewhere else that they are constantly reminded of the reason they want to be out of debt.
When things happen in life that try to push you off-track from your goals(and they always do), review your WHY and remind yourself of the reasons that you developed your plan. Keep this motivation front-of-mind to help you push through whatever challenges arise.
Also track your progress
When you have a big WHY sometimes it seems just so far away. And perhaps it is. But one way to help you stay motivated, beyond just having the WHY reason, is to track your progress.
We’ve all seen those thermometer charts that organizations use when fund-raising to visually represent how close they are to their goal. Do something similar for your personal goals. For some people a graph of the debt level that shows the balances getting smaller every single month can be very motivating. Others with a number of different types of debt have had success writing the debt names down and crossing them off as they get paid. Find a visual representation that works best for you and your family.
It’s all about priorities
Personal finance is really all about priorities. If you have a big WHY defined, placed somewhere to remind you, and are tracking progress – you will have a better chance of success in focusing on the correct priority.
We’ve spoken to many people who don’t like the idea of a budget. They think it is restrictive and will force them to do something they don’t want to do. But think about it. The budget isn’t the thing restricting spending. The real restrictive issue is the amount of money available to spend and the balancing of priorities for those limited funds.
Is your priority to buy that new electronic device today (and probably another newer model a year or two later) or to pay off your mortgage early? Is your priority to eat out for dinner twenty times per month or to cut back a little to develop a consistent investing plan? Is your priority to smoke two packs a day for the next 30 years or to put that same money to work and retire a millionaire?
Life is all about priorities and personal finance is a big part of life. Take some time to think about your personal WHY and the tips in this article to help keep you motivated and on track to achieve your goals.
By the way, just like athletic coaches can help you stay on track with your fitness goals, a fee-only advisor and money coach can help you stay on track with financial goals. Providing guidance and accountability are definitely big reasons that some people decide to engage in a long-term relationship with a coach. That might be something to consider if that type of motivation tends to help you.