Americans are notorious for wanting to keep up with their peers. A popular holiday commercial for a home improvement store features one neighbor putting up his holiday decorations in his yard. Not to be outdone, his neighbor rushes to the home improvement store and buys triple the number of lights and decorations for his own yard just to look better than his neighbor.
Nowadays, we see homes with three and four car garages, seven year olds with cell phones, a couple dropping $100 or more for a nice dinner out. . .We see excess everywhere. Even if we aren’t being excessive, we may run into unexpected obstacles in our lives. Many Americans carry debt from obtaining a college education, paying medical bills or other expenses. Things happen in life, and it is, unfortunately, not unusual to find yourself in debt. In a country where the average credit card debt per household is $7,134, Americans have plenty of company when it comes to being in debt. Yet, we hide debt and do our best to pretend it doesn’t exist.
By not being honest about our debt load, we can pretend that it is not as bad as it is. Many people even hide the debt from themselves by never taking the time to add up the amount they owe, computing the interest rate, computing how many years it will take them to pay off the debt, and how much debt they will pay over the life of the debt. If they don’t figure this out, they can keep spending freely. If they take the time to figure it out, the free spending is typically over, and if it isn’t, spending is now attached with a sense of guilt. It is easy to see why people want to avoid the reality of their financial situation.
Facing Financial Reality
If you are looking to free yourself from the chains of debt, the first step is to compute exactly how much you owe. After you have done that, you need to create a plan to pay back the debt aggressively. My husband and I recently did just that.
My husband completed his Ph.D. a month ago. He was enrolled in a dual Master’s/Ph.D. program, and it took him 10 long years to complete. He took two years off during the course of the program to care for our two young children while I worked full-time, and one of his professors was quite slow with giving him feedback and guidance on his dissertation. These two factors probably prolonged his graduation by three years. Because I was working full-time, we managed to avoid any student loans until we had our last two children 17.5 months apart and I quit my job because the cost of daycare would have taken almost my entire salary. He is graduating with $30,988 dollars in student loan debt, and I also have some residual student loan debt. We have created a plan to aggressively pay down our debt, and we plan to be debt free within 3 to 4 years, hopefully faster if we can continue to make extra money.
Confessing For Accountability
I am a fan of Gail Vaz-Oxlade, host of the popular TV show, ‘Til Debt Do Us Part. I like her no nonsense approach. When she is counseling couples to get out of debt, she often requires that they confess their debts to at least one close friend or family member, but sometimes she makes them reveal it to all of their close friends and family members. I always cringe when I watch those scenes because it feels akin to standing naked in a room, and indeed they are standing financially naked in front of those they care most about. The key here is not just to reveal your debt, but to reveal your plan to get out of debt.
Why Reveal the Debt Repayment Plan?
By revealing your debt, you are taking ownership of your debt. You did this, and you are willing to take responsibility. When you explain your debt repayment plan, you are holding others to help keep you accountable. No longer can you enjoy a carefree $100 dinner out for two. You will have others cheering you on as you repay your debt. In addition, they will understand when you have to say no to outings or when, instead of going to a movie and out to eat with friends, you invite the friends over to your house to watch a DVD and have a home cooked meal.
I choose to reveal the extent of our debt on my blog along with our action plan to pay it off. I am not going to lie, it was difficult to write down the numbers. It was even more difficult to get the frantic call from my mom after a friend had her read the debt confession blog post. She immediately offered us money she really doesn’t have to help us pay down our debt, which we declined. For a few weeks, she tip toed around our finances and continually expressed her concern. Yet, now, as she watches us attack the debt and implement our debt repayment plan, she is more confident and comfortable with the situation.
I know at least a handful of my relatives read my blog, and I am guessing that they have shared our situation with other family members. Does it make things a bit awkward? Yes, it does. However, even among the handful of relatives that know about our debt, at least half of them also have a serious level of debt. I am hoping by sharing our story that I can also motivate those who are in a similar situation.
There are some countries where very few people hold debt. The United States used to be one of those countries, but thanks to the economy and the ease of which we can use credit, many Americans have debt. You are not alone. If you want to take concrete steps to get out of debt, take the time to determine how much debt you have, make an action plan to pay it off, and tell at least one person you love and trust how much you owe and how you plan to pay it off. Revealing your debt is difficult, but it can also be empowering. As one who has done it, I highly recommend a debt reveal to help you accelerate your debt repayment plan.
Money Beagle says
I don’t reveal many direct numbers about our net worth, debt, salary and such like that. I just never have been very comfortable with it but I think it depends on each person.
We don’t hold any credit card debt. The only debt we have is a mortgage (just re-financed last week, yay) and one student loan debt. So the accountability factor that you mentioned is pretty low for us.
Peter Anderson says
While we were in debt we never revealed it beyond my parents and my in-laws. Our debt was never unmanageable, but having others know – even just our parents, was motivating. It made us that much more motivated to get rid of the debt.
On the other hand, sharing too much about finances can often have negative effects as well. I wrote about that here: Sharing With Family About Money
I’m debt-free but that second option sounds better to me pretty much any day of the week.
Good point Dave. That might be part of the reason why you are debt free. More and more I am beginning to enjoy things that cost less or are free.
Jess @JessCantCook says
I can see how for some people it might hold them accountable telling their family about their debt but for me not only would it be a little embarrassing, I would be afraid they would try to offer to help us out (I’m a 20 something newlywed). We’re very aware of our debt and for us, not telling our families is less stressful since we’re already stressed that we got ourselves into debt in the first place. We hold each other accountable to not incur any more debt and also to get ourselves out of it!
It’s about being accountable…. accountable for how you’re going to pay off your debt. And hopefully, by letting someone else know.. it will help you not waver in your commitment to pay off your debt.