Retrain your brain.
Have you heard of the 80/20 rule? The 80/20 rule, also known as the Pareto principle, says 80% of a result will come from 20% of the effort exerted. When it comes to personal finance, focusing your efforts on your mindset (one seemingly insignificant aspect of personal finance) will help you achieve the greatest result. Your income matters and your spending matters, but having the right mindset will help you achieve more than numbers possibly can. So how do you shift your mindset around money?
You start by committing to paying off all your debt as fast as you can. Have you talked to your peers about paying off debt? If you have, you’ve probably noticed that most of them will tell you not to pay off your debt (or at least not in any hurry). They will tell you that you should be saving and investing. And, that you should have a new car, new clothes, vacations, and… the list goes on. And, this is what you’ve been trying to do all along, right? How has it been working for you? Do you feel burnt out? Do you feel like you’ve given up so much and haven’t gotten to where you want to be? Do you feel like life doesn’t cut you a break?
Paying off debt as fast as possible seems counterintuitive. You might feel like you’re missing out on opportunities, investments, or just enjoyment. But here is the truth: The reason we pay off our debt before doing anything else is to train our brain.
All the things you want to buy and do today are still going to be there on the other side of paying off debt. And, if you buy and do all the stuff you want now, before paying off debt, you’re going to be two or three years down the road with all the same debt (and maybe even more debt), more stuff, and still wanting more things. Have you ever bought new shoes that you had to have, just to already have another pair in mind that you also had to have? The same will apply to bigger purchases, like a car or a house. We’re always going to want more, or different.
Paying off our debt is the first step to retrain our brains to assess the things that really matter to us. It allows us to have a clean slate so that we can make choices that are intentional. Because when we’re not using credit for things, we’re a lot more intentional about our purchases.
There is a food program known as the Whole 30. The concept of the Whole 30 is to eliminate anything processed from your diet and eat only unprocessed, whole foods, for thirty days. During those thirty days, you eliminate processed food, dairy, grains, sugar, and alcohol. At the end of the thirty days, you introduce, one at a time, one of those earlier-eliminated foods, and with your new whole food, clean slate baseline, you can see how you are affected by each one of those food groups.
Paying off all your debt is like eliminating all the bad items and giving yourself a chance to reset before experimenting again and finding out what it is that works or doesn’t work for you. It allows you to learn to live within your means, and it lowers your Bottom Line. And along the way, when your sole goal is to pay down debt, you train your brain to think about what matters to you. What you value. What your goals are. When there isn’t extra noise (i.e., saving, investing, buying, vacations, etc.), you get to take that time to focus in on what you care about. The choices you make when you are operating from a place of safety (i.e., no debt and a solid foundation) are likely completely different from the choices you make when you operate from uncertainty, overwhelm, or fear.
After working so hard to get rid of debt, every purchase you make will be thoughtful, intentional, and will serve to align with your values. You learn that every purchase affects your choices and opportunities.
Paying off debt is not the normal. And it’s hard! People are not going to understand. They are going to encourage you to keep borrowing. That debt is good. That it’s good for your credit. That it creates opportunities. That it will allow you to invest. And that you will be missing out on life.
Yes, at some point, you should invest. You should work to have good credit. But, when our normal has been to buy whatever we want next and next and next, we don’t know how to think about what it is that we want. We don’t know what in our financial diet is toxic.
If you’re doing this hard work of paying off your debt, I’m here cheering you on! I’m so proud of you. Not everyone will know how to do this because a lot of people haven’t exercised this muscle. You’re doing great work. You are retraining your brain, you’re creating more safety and security, and you’re allowing for more opportunity and choice for your family.
So, when you’re on this long and arduous journey, and you want to buy something or take a vacation, write it down on a piece of paper. You might write down something which is as big of a purchase as a home, or a car, or as small as a pair of shoes or a kitchen table (all things I wanted along the way of my debt-free journey!). Every now and again, revisit your list. My guess is that list will change a lot during your journey.
Keep up the great work.
Cheers!