One of the most common questions in my financial courses is what should be done about debt. With the insight that comes from being a boomer woman, I have learned that our biggest life lessons usually follow our most painful experiences. As a result of the 2008 economic crisis, using debt wisely is no doubt one of the biggest and most common financial lessons of our lifetime.
Aside from the usual money strategies, such as paying down the highest interest rate debt first, emotional aspects of debt affect our money mindset. There are several steps that can help heal those money wounds caused the by shame and humiliation that often accompany piles of high interest credit card debt. The mindset has to be right before progress can be made to achieve financial health.
1. Know where you are. This is step two in the Financial Woman 5 Steps to Grow Your Money process. Make a list of all of your debt, the associated interest rate, and total it. Avoidance is always more stressful than acknowledgement and a plan to makes things better.
2. Separate good debt from bad debt on your list. Pay off the bad debt. Mentally accept that it’s alright that you have good debt; it may even be smart, especially by locking in low interest rates for appreciating assets.
3. Own responsibility for whatever that ugly bad debt number is. Under almost every circumstance, barring catastrophic illness, that debt exists because of the choices you made, and actions either took, or did not take.
4. Forgive yourself for your bad debt. This is a win-win; harm does not come from forgiveness, but all kinds powerful of healing does. Healing brings wellness, and from wellness springs proactive change and empowerment!
5. Focus on using your personal assets, such as your talents and expertise, to increase income so that you can reduce your bad debt. Reducing spending can only go so far, while increasing income is dynamic. Besides, it’s a lot more gratifying and overall beneficial through the personal growth that takes place when you increase your ability to earn money.
6. Embrace the lesson that you have gained from this experience; strive to actually have gratitude for what you have learned.
7. Recognize that debt is actually repayment of credit; someone entrusted you enough to loan money that you would repay in the future. Honor yourself for that repayment because this mindset shift is powerful.
Acceptance, forgiveness and acknowledgement; these are all powerful steps that will lead you to not only grow your money, but to live a rich life in so many ways.