Do you know what surprised me most when I started paying off my
rather large amount of debt?
Most of what I read - websites, blogs and books - abounded in
truisms like 'don't spend more than you earn', minute
technicalities of saving and/or righteous judgement. Some of that
was useful, some of it was not worth more than a second's look.
What I read, offered information but not the wisdom and
understanding that I needed to pay off my debt.
The wisdom necessary to
pay off our debt, and stay debt free, I had to figure out. Here
I'd share 7 important things about debt that personal finance
experts won't tell you.
Before we move on, let me tell you a bit about me.
I'm Maria; I blog on personal finance and I'm professor at two
universities. I have written two PhD theses and have initiated in
research many generations of students. Smart, uh?
I also had £100,000 of consumer debt at the beginning of 2010.
You see, you can get yourself in debt irrespective of education,
background, occupation, gender…Shall, I continue?
The key point is that anyone can get themselves in debt.
As with many things in life, getting in debt is not what matters;
what you do next is what counts.
What did I do, you may ask?
I got fed up and I got determined. I learned a lot of what there
is to know about money: about how to make it, keep it, spend it and
invest it. This all paid off. Three years later, at the beginning
of 2013, we had paid off all our debt. Now we have serious savings
The 7 important things about debt I share here, didn't come from
bookish learning: they were suffered and tested through
#1. Having debt is like stealing from your future self
Some people tell me that they have debt but they are not
bothered about paying it off. Some people were also very negative
when the news that I paid off £100,000 worth of consumer debt in
three years; some muttered that I should have gone bankrupt.
You know what?
These people must realise that staying in
debt is like stealing from your future self. Why would you want
to do that?
#2. Paying off your debt is very empowering
After you've just realised how much debt you have, the way to
debt freedom looks like a climb to the summit of Everest: long,
cold, hard and very daunting.
Don't feel disheartened. Just start paying your debt off. Very
soon you'll see results and this is so empowering.
When we paid off over £70,000 in two years, I started feeling
like Rambo: nothing seemed impossible and sky was the limit.
And you know what? I hustled like a pro! You can feel my elation
in my announcement that
we are debt free.
#3. Not everyone can pay off their debt
Personal finance experts, particularly bloggers, will try to
motivate you by telling you that everyone can pay off their
This is not true. To decide whether you can pay off your debt,
use The Money Principle 'debt repayment coefficient' or DRC. This
DRC = (Annual Pay After Tax
- Annual Survival Budget)/total debt
If your DRC is larger than 0.18 you
can't pay off your debt and need to seek professional help. (I'm
assuming you know or can work out your Annual Survival Budget but
let me give you a hint: this is the spending that you need for your
survival and not much less. Still, your survival budget can be
I'm not a spoil sport and I'm not here
to burst your bubble. I'll motivate you by saying that if you find
your DRC is high, you can start learning how to make more money.
It's all splendid fun.
#4. Most people are in debt because they don't earn enough
This is certainly something you won't hear often from personal
finance bloggers. They'd rather tell you how to save more and be
frugal to the extreme.
The problem with frugality is that it can be very dangerous when
extreme. Yes, you can cut your food budget but this often means
inadequate nutrition and limited capacity to do much else than make
designs on how to be more frugal. Yes, our minds are limited as
Yet, when you look at statistics the median
gross household income in the UK (2 adults) is approximately
£22,000 (this is before tax) and the basic cost of living per
person is approximately £15,000 per person. Can you see the
problem? It is not surprising that 60% of the people in the UK who
live below the poverty line work, is it?
Make sure that you earn enough before you start making plans to
pay off your debt.
#5. Habits are the key to debt
When talking about debt we usually talk about money. So, people
tell you that you are in debt because you spend more than you
This is technically correct but rather misguided. You are in
debt because you:
- Don't balance your current account regularly;
- Don't control your spending;
- Don't spend mindfully;
- Buy quantity rather than quality; etc.
To put it bluntly, you are in debt because of your habits. To
get out of debt, and to stay debt free, you need to change your
#6. To pay off your debt you need focus not money
"Ah, Maria, but of course I need money to pay off my debt."
Money is secondary, friends. You can spend your money on any
number of things. To spend it on paying off your debt you should
develop the focus of a hunter. You must stalk your debt, chase it
and hit it until it is all gone. All of it!
You wish to know what I mean?
When we were paying off our debt, the smallest payment we made
was slightly over £4. This, my friends, is the focus of hunting
#7. Having debt makes you very vulnerable
Most people would rather judge when they talk about debt. I've
always been practical (and I never allowed anyone to judge me).
I wasn't ashamed of having debt - after all, this is the norm
and our capitalist societies thrive on debt. No, what really made
me mad, so mad that I didn't stop until the last penny was paid
off, was that having debt made me very vulnerable.
The bank could have taken our house.
My employer had a big trump card over me: I needed the job.
My choices were severely limited.
If I were to encourage one emotion when dealing with debt it
would be the craving for independence and security. Because they
feel great and you cannot have them when you have debt.
Becoming debt free is the best thing I ever did apart from
giving birth to my son. It wasn't easy. It took determination,
ingenuity, extremely hard work, learning new skills and repeatedly
leaving the safety of comfort zone.
I don't regret a second of it. Paying off my debt is one of the
most empowering periods of my life. It taught me that I can face
anything in life and can not only survive but thrive. It taught me
to adapt, learn and grow.
Best of all, it was so worth it. People are right when they say
that the ones who earn interest sleep better than the ones who pay
How has your sleep been?
Author's bio: Maria Nedeva
is the founder of The
Money Principle where she teaches people in financial trouble
how to build sustainable wealth. You can follow Maria's work on Facebook and