We’ve been on our debt free journey for almost 1.5 years and I’ve learned so much during that time. In the beginning, I was so focused on exactly when we would be debt free. I wanted to know the month and year so we could count down and try to beat it.
If you aren’t familiar with my story, when I got engaged I had my first budget meeting (which was a major fail) with my fiancé to understand how much debt we had and to create our first budget.
After adding up all of his debt, the total was $154k. I was thankfully debt free so we just had to work on paying off his debt which would take us a loooongggg time.
You can read all about his perspective on our debt free journey here.
I was really focused on figuring out how long it will take us to pay it off. Everyone posts their debt free date on social media and I wanted to know ours.
Based on just our minimum payments, it said it would take us like 10 years to pay off our debt. I knew we could pay it off faster but I wasn’t exactly sure how much faster. There are so many factors that go into how quickly you can pay debt including:
- Number of sinking funds and how much you contribute each month
- Cash flowing purchases
Depending on the month, the amount we could throw to debt changed. This would continually change our debt free date.
I became obsessed with the date and not the why or the plan. I decided to stop tracking the date and stick to my plan, my why and remind myself we will pay the debt off. In my opinion, whether it takes 4 years, 4.5 years, or 5 years doesn’t really matter if we are continuing to reach our goals and not add to our debt.
If you know and track your debt free date, that is great! When you are paying off six figures of debt, your debt free date might seem so far away and be discouraging. For some people it is a motivator but for me it increased my anxiety.
I wanted to share why we don’t track our debt free date and what we track instead:
Reason Why We Don’t Track Our Debt Free Date
1. The Date is Going to Fluctuate
When you first calculate your debt free date it might seem so far away. The date will change. It can end up sooner if you can throw a lot to debt each month or it could end up later if an emergency happens or you cannot put as much to debt each month. Seeing that date change could bring relief or panic. Calculating how long it could take you to pay off debt if you just pay the minimums could be super discouraging (especially if you are paying off six figures like us). It might make you feel defeated like why bother paying more.
Or maybe you feel like how will you ever buy a house or reach other financial goals if it will take you 10+ years to pay off debt?! That is why a balanced financial plan is more important than focusing on your debt free date (in my opinion).
2. Increased Anxiety
When I first saw the estimated debt free date for all of our debt it was so far away I almost threw up. How are we ever going to get out of debt?! I cried. I panicked. I was so overwhelmed by this information that I wanted to give up. Although we obviously didn’t give up, seeing the date definitely increased my anxiety. Tracking your debt free date is a tool that some people love but for me, it made me very overwhelmed. I still track our debt payoff but I am less focused on our debt free date and more focused on if we are reaching all of our money goals (debt, savings, spending).
3. The Plan is More Important
At the end of the day, whether you pay off debt in 2 years and 3 months or 2 years and 8 months, it does NOT really matter. Even if it takes you 4 years instead of 3 years, who cares if you are still making progress and reaching all of your balanced financial goals. This is just my opinion, BUT I think we get so focused on our debt free date and forget that we CAN save, pay off debt, and spend on the things we value all at the same time. We don’t NEED to wait to save for a house until we are debt free.
We can still go to a football game and enjoy the things we love, while we have debt. What is important is creating a balanced financial plan and sticking to it. You can set debt payoff goals, savings goals, and spending goals all at the same time. Yes, I said spending goals. For example, every year we buy season football tickets for my alma mater (the University of South Carolina). We save for them, add extra spending to our budget during football season months, and the spending doesn’t cause us any additional anxiety.
If you need help creating a balanced financial plan or you want to go over what you are struggling with, click here to learn more about coaching.
What We Track Financially
1. Year Overview of Expenses
I have shared this before but one thing that has helped us SO much with sticking to our budget, reducing anxiety, and creating a budget in about 5-10 minutes is tracking our year overview of expenses. Below is a snippet of my personal excel file and what I send to my clients but this helps us see what is coming up, if we have months that have a lot of expenses, and if we need to adjust any goals for the month. For example, if June has $1500 of expenses and our average monthly is $1,000, we can either put less to debt/savings to make up the difference or we can try to move some of those expenses to May or July. Planning ahead helps us reduce the chances we will be over budget that month.
Although we don’t track our spending for every category anymore, if you’ve never tracked your spending before I highly recommend tracking for at least 2 weeks but preferably a month. Right now we only track the categories we overspend which is food. We have a food category that includes groceries and eating out because it simplifies our budget and I really don’t care whether the amount comes from eating out or groceries as long as we don’t go over. Now, I say this as someone who has been budgeting for YEARS. I am comfortable with it and I think it is important to separate the two if you are just starting out.
3. Savings Goals
We have multiple short and long term savings goals. Last year we were saving for our wedding and honeymoon. This year our big savings goal is a house down payment. We started saving for a house as soon as our wedding was over. We also track multiple sinking funds. Sinking funds have been a lifesaver and I HIGHLY recommend creating sinking funds and savings goals. I wrote an entire blog post on sinking funds which you can read here.
We have 3 Ally savings accounts. This was before buckets existed so I just left the 3 and gave them all a purpose. If you don’t know what Ally buckets are click here. They are AMAZING.
Account 1: Emergency Fund
Account 2: House Fund
Account 3: Other (aka all our sinking funds)
4. Debt Payoff Amount
We DO track our debt payoff amount (just not our debt free date). Below is a screenshot of the template we use and I update our monthly. The template below doesn’t have our numbers but it is an example of how it is used. I like to see how much we’ve paid off and how much we have left. This helps me stay motivated and decide if I want to change our plan at all. We’ve adjusted the order we pay off debt a few times (mostly because I get bored) but we pretty much stick to the debt avalanche method (highest interest rate first).
I hope this helps explain why your debt free date doesn’t need to dictate your life and your financial plan. Maybe you find it extremely helpful to track and that is AMAZING! It is 100% personal preference but for me, there are more important things to track.
Do you track your debt free date? Is it helpful or no?