Earn an extra $50,000 a year and apply it towards debt.
Lately there have been a rash of articles talking about large debt payoffs in a short period of time. I congratulate those on their dedication. But at the end of the day, we need to remember that those numbers are special cases. As the diet pill commercials say, results are not typical. As such, when personal finance bloggers talk about these extreme debt payoff scenarios, and play it off as a simple matter of dedication, we do a disservice to our readers.
The problem with extreme debt payoff stories
I don’t see extreme debt payoff stories as inspirational; I see them as depressing. I’m a pretty frugal guy, why can’t I pay off my $60,000 of debt in a year? Well, to start with, I don’t make $60,000 to begin with. And statistically speaking, there 57.8% chance that in 2011, you didn’t either. How are you supposed to feel about their ability to pay down your own liabilities when you read about someone paying more debt than your annual salary?
Instead of feeling, wow, if they can do it, I can too, the feeling is instead it takes large salaries to pay off debt; I shouldn’t even try.
I understand why other bloggers write those kinds of stories; they get attention. If you write about paying off $50,000 off of debt in one year and you get attention from big media outlets and tons of traffic. When I write a post in 2019 titled “How I Paid off $60,000 Worth of Debt in Just 8 Years” there will be some well-wishes from my regular readers, but no large fanfare. Because that story isn’t phenomenal. it’s simply average.
How can debt payoff stories be portrayed differently?
Could the answer be instead to talk in percentages? If you have $50,000 worth of debt and earned $100,000, you could say you paid off 50% of your income in debt. If I made $100k last year, I’d be debt free by now too. The problem is that would still favor higher incomes. 50% of your income going towards debt sounds more exciting than the 17% we are currently managing.
Maybe we should start talking about payoffs in terms of percentages of our discretionary income. If someone makes $100,000 per year and has $2000 per month in household expenses, their discretionary income is roughly $53,000. Then that 50k paid off is 94% of your discretionary income. Good for you!
Going over my income and expenses for the past year, it looks like I applied roughly 67% of our discretionary income towards debt payments. Finally, an apples-to-apples comparison between my debt payoff efforts and that of my fictional counter-part. I didn’t do quite as good as my straw-man, but I can still stand proud with that number. No longer would I have to slink away in shame comparing my measly $13,000 of debt payments to that $50,000.
And I’m willing to bet that saying that I am applying 67% of my discretionary income towards paying off debt is just as inspirational as that guy who paid off $91,000 worth of Harvard student loans in 7 months.
Do you find extreme debt payoff stories inspirational or do they get in the way of your own motivation?