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I’ll never forget the time back in 2001 when, at age 33, I decided to tally up all the credit card bills I’d amassed. I knew I owed a lot after years of overspending, but when I wrote down all of my obligations, I was shocked to discover that I’d racked up a massive $100,000 worth of consumer debt.
Talk about a financial wake-up call. I wish I could say that I instantly had a game plan and knew exactly what to do. But I didn’t — I just knew that I had to begin tackling the debt somehow. So I started challenging myself with weekly and then monthly periods of no spending on frivolous purchases. For me, that meant an end to things like frequently eating out, taking vacations I couldn’t afford and especially buying things I didn’t need — like yet another black dress.
I also started using cash far more often than credit. Plus, I took every windfall I received, including income tax refund checks, holiday gift money and year-end bonuses from my job, and put those lump sums toward my credit card bills.
Three years later, by 2004, I was debt free.
I no longer stressed about money, lived paycheck to paycheck or fretted over how my debt impacted my credit rating. I even wrote a book, Zero Debt: The Ultimate Guide to Financial Freedom, about all the strategies I used to conquer my debt, and it became a New York Times bestseller.
But I can honestly say now that getting out of debt was nothing compared to staying out of debt.
It’s like losing weight. Most people can actually lose weight: Eat healthier, exercise more and — voila! — the body responds accordingly. The harder part, as many dieters can attest, is keeping the weight off. That requires a serious lifestyle change.
So it is with spending wisely and staying out of debt. What’s most difficult, I’ve discovered, is controlling your spending while shifting your perspective to what I call a zero-debt mind-set.
Based on my personal experiences, and the professional insights I’ve gleaned from 15 years working as a money coach, I now realize that developing a zero debt mind-set happens over time and involves four phases.
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The 4 phases of a zero-debt mind-set
Phase 1: Acceptance.
The turnaround can't begin until you consciously recognize your spending or financial problem and refuse to keep your head in the sand about the issue. It’s when you have that initial “aha” moment — or even that “Oh my God, what have I done?” reckoning, as I did when I finally calculated the total amount I owed.
Phase 2: Commitment to Change.
This is the period when many individuals feel extremely determined to turn their financial lives around and perhaps even disgusted by their previous financial excesses or mistakes. As a result, people in this phase will typically embark upon no-spending challenges, decide to cut up or stop using their credit cards and generally live much more frugally.
Phase 3: Frugal Fatigue.
Again, just like food dieters usually get tired of restricting their calorie intake — or never eating any sweets — many people who slash their spending for extended lengths of time also wind up feeling economically deprived and lose their motivation. That's why Phase 3 marks a pivotal transition period when people often take one of two paths: They temporarily backslide, or even completely give up their frugality, or they evolve their thinking about what it means to be a smart spender and decide to adopt realistic spending patterns that fit their unique goals and priorities.
Phase 4: Financial Enlightenment.
You reach this enlightened stage with the recognition that being a smart spender doesn’t mean being on a financial fast (which can lead to yo-yo dieting), but rather spending in alignment with your goals and values. I do this by setting financial priorities, letting go of unimportant things and not caring what others think about my spending choices — that includes what I do choose to spend money on (such as when I hire a maid on occasion to help clean and save me time) and what I don't (I don't have a nice car, for example).
My kids’ education, a secure retirement and travel are important to me, but having a new vehicle isn’t. That’s why I drove my last car for 16 years. When it finally gave out in December 2017, I waited several months, then bought a 6-year-old vehicle for $15,000. Meanwhile, I’ve devoted about seven times that amount toward my children’s college education. I'm also maxing out my annual 401(k) contributions to help ensure a comfortable retirement and set aside money for a recent (relatively frugal) 50th birthday celebration in Europe.
I know I’ll never go deep into consumer debt again because I’m far more conscientious about the “why” behind my spending, and I’m not as easily tempted by the same financial pitfalls that tripped me up during my 20s and 30s.
Smart spending, I now firmly believe, depends on knowing when to say enough is enough and to be perfectly content with what you already have.
Lynnette Khalfani-Cox is a personal finance expert known as the Money Coach and the author of numerous books, including Zero Debt: The Ultimate Guide to Financial Freedom.