Home > Personal Finance > 5 Steps to Achieving the Money Mindset to Get Out of Debt

Comments 0 Comments

When we started dating 13 years ago, we quickly became consumed by ourselves, as new couples often do. The only thing more important to us was our social life. Denver’s queer scene at the time was bumping. In addition to regular happy hours and expensive dinners, there was a different bar or club to go to every night of the week. They gave us great venues to see and be seen.

A typical Friday and Saturday night for us included going to the gym to get our “glamour pump” on and then putting in a quick “disco nap.” We’d then wake up and have the tiniest morsel of food so that we maintained the flattest of tummies. While we put on our brand new $400 jeans and $100 T-shirts, we’d sip our world-famous coffee martinis to get a slight buzz and pick-me-up before the cab arrived to start our night’s adventures.

It wasn’t until we dared to fantasize about building a vacation home in the mountains that reality hit us. The reality was that we were two 30-something professionals renting a friend’s basement apartment because we had over $51,000 in credit card debt between the two of us. We were telling people how to manage their money and not managing our own. We were the cobbler’s kids with no shoes.

Here are five steps we took to reverse course that you can apply to get your own spending on track.

1. Perceive Your Purpose

Our peers were getting married, buying houses and having babies, and we were digging ourselves deeper and deeper into debt by living and spending unconsciously. We weren’t living according to our values because we didn’t know what our values were.

Over the course of a few months, we had discussions about what we truly wanted and why we were headed in the direction of financial failure. We realized that while we enjoyed our social life, our fancy clothes and dinners, what we mostly wanted was to save for a financially secure retirement, travel and give back to our community. Up until then, we weren’t doing much, if any, of those. This created a conflict that manifested itself in us burying ourselves deeper and deeper in debt. (You can see where your debt levels stand by viewing two of your free credit scores, updated every 14 days, on Credit.com.)

Ask yourself: What are your long-term financial goals?

2. Plan for Your Purpose

When we realized our three goals, we created a plan to achieve them. When we help people with their money now, we often use the rocks, pebbles and sand analogy.

How do you get rocks, pebbles and sand all into the same jar? You can’t put the sand in first, otherwise there won’t be room for the rocks and pebbles. Put the rocks in first, then the pebbles and then the sand. This was our strategy to pay off our debt and to achieve our three purposes.

The rocks represent our three long-term (or most important) goals: Save for retirement, travel and give back to our community. The pebbles represent the medium-term goals that support our three long-term goals. These include actions such as putting enough into our 401Ks to get our full employer match, opening a travel account and funding it little by little with each paycheck, and narrowing down the charities and causes important to us. The sand represents our short-term goals that support our medium-term goals, such as having and maintaining a budget, using a grocery list for grocery shopping and having a maximum daily spend to help us stay within budget.

Ask yourself: What short- and medium-term goals can you use to fund your long-term goals?

3. Project Your Payments

Once we knew what our short-, medium- and long-term goals were, we could easily cut out the spending that didn’t serve those goals. Each financial decision is now measured by whether or not it supports our purpose.

Gone are the endless happy hours and boredom-shopping. No longer do we do our weekly grocery shopping without a grocery list and weekly menu. We’ve adopted an all-cash lifestyle and no longer carry credit card balances from month to month. Whenever possible, we use free or not-so-expensive alternatives.

We’re more inclined to make an extra payment to our travel account than to subscribe for cable. Extra money, from birthdays to bonuses, are put toward retirement.

This money-conscious or purpose-driven spending has allowed us to move out of our dark, dank basement apartment into a condo of our own in a high-rise that overlooks downtown Denver and the Rocky Mountains. We’ve gone from a deficit of $51,000 to a net worth over $500,000.

Ask yourself: What is the purpose of every expense you make?

4. Proof Your Plan

The success of any plan ultimately comes down execution. Was it or was it not executed well?

It would be disingenuous to say that once we discovered our purpose and created a plan that everything fell into place for our success. The truth is that even to this day we revisit our plan from time to time and track accordingly to stay on target.

Occasionally there’s the unexpected bill. One of us has a weak moment and overspends their portion of the budget. We estimate our expenses incorrectly. We get a raise. We lose a client. There are any number of reasons why a plan needs to be proofed and tweaked. The goal is to continually seek progress and not perfection. As Voltaire suggested, “Perfect is the enemy of the good.”

Ask yourself: From day to day, week to week and month to month, is your plan progressing?

5. Purge Your Pain

Inevitably when you start making financial progress or even attain success, you’ll feel a sense of frustration. With our financial lives headed in the right direction, we occasionally say, “Why didn’t we start this sooner?”

Our advice, which we give to ourselves each time we feel regret, is that there’s no point in looking back, only looking forward. It’s our focus on today’s achievements and not yesterday’s failures that ensure a successful tomorrow.

Ask yourself: What value is your guilt providing you?

This is our strategy for purpose-driven spending, putting our money to work for us. We believe it was our unconscious living and spending, our spending without purpose, that buried us in credit card debt and financial shame. Once we had a purpose, we could create a plan to achieve prosperity.

Image: jeffbergen

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other sponsored content on Credit.com are Partners with Credit.com. Credit.com receives compensation if our users apply for and ultimately sign up for any financial products or cards offered.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team