1. It is much easier to get into debt than it is to get out of it. I racked up a significant amount of credit card debt during my years as a graduate student. I moved to a city I couldn’t afford, accepted a job that didn’t pay well, and used credit cards to make up the difference. Needless to say, I accumulated debt pretty quickly. It’s not like I was “balling out of control” taking fancy vacations or living some lavish lifestyle but the cost of basic expenses in a high-cost-of-living area took its toll. Although it was fairly easy to rack up this debt, I had to make some hard sacrifices to pay it back.
2. Paying off debt takes a lot of sacrifice and behavior change. I delayed paying off credit card debt when I got into medical school simply because I couldn’t work during that time and was already living on student loans. Once I graduated and started working as a physician, paying down that debt was one of my top priorities. The interest rate on my credit card was about 12% and although that’s great for a credit card, the longer I kept this debt the longer I was going to be paying at least 12% more for the things I purchased years ago. In order to pay it off as soon as possible, I literally threw money at this debt. Each month for the first 6 months I was a physician I had a chuck of money automatically sent to the credit union that issued my credit card. Every month I saw money that I could have spent on a nicer apartment or a fancy vacation go to pay back debt I had accumulated well over 6 years ago. I was jealous of my classmates who ate at restaurants all the time or were always traveling to nice places when I was essentially living like a broke college student trying to back this debt. Trust me, it was tough.
3. The temptation to avoid paying it off can be hard to resist. There were so many times where I’d want something (like a nice lamp for my apartment, a fancier bed spread, or a newer cellphone) and I realized that I could probably purchase those things easily if I didn’t have so much money going toward paying off my credit card. I contemplated delaying paying off the card by a few months in order to experience some gratification now. While doing so may not have totally derailed my financial goals, it would have created a dangerous habit that could cost me even more down the line: delaying debt repayment to purchase material things. I’m a firm believer that the habits, mindset, and discipline needed to pay down debt are the exact same traits needed to save, invest, and build your net worth. Delaying gratification is never easy, but learning to do so had such a positive impact on my finances and ability to build wealth.
4. The debt was costing me more than I realized. I decided to prioritize paying down my debt because I realized I was paying drastically more for things that I purchased years ago. In other words, the credit card company was charging me monthly interest of over 12% per year on the total balance of the card. The longer I delayed paying it off, the longer I would be paying interest. When I started learning more about personal finance, I realized the debt was costing me even more than extra interest payments. It was also delaying my ability to build wealth. Every dollar I was spending on this credit card debt, was a dollar that wasn’t going into retirement accounts to be invested in a way that actually earned me more money. Instead of EARNING 8% per year on money invested in retirement accounts, I was actually PAYING 12% more on debt. The sooner I paid off this credit card, the sooner I could get more money invested and start earning interest instead of paying it.
5. Paying down the debt improved my quality of life. Now that I’m credit card debt free, I’m so much happier. I no longer have a large chunk of money going toward a bill I accumulated years ago. Instead, I’m investing more money into retirement accounts and saving more money in my emergency fund. I’m also planning a couple international vacations that will be paid for in cash. To be able to live my life without relying on credit cards is such a freeing feeling. Plus, it took so much sacrifice to get it paid off that I literally never want to go back.