Paying down debt too quickly can be just as stressful as holding debt in the first place, or so I recently learned.
At the beginning of January I made 3 financial resolutions to tackle this year, one of which was to put my entire tax refund toward my debt. So, when my $625 refund appeared in my bank account during the first week of February I knew what I had to do with it.
When I went to approve two online payments using the refund — one to pay off a card’s balance entirely and one to pay off about half of another — I hesitated. I had just received a large chunk of extra money in my bank account and it was just about to disappear again. But with my blog post in mind I gritted my teeth and clicked the submit button.
A wave of relief crashed in. I had paid off one card and made a serious dent in another. I felt so good about my actions that when I was paid the following week I paid all my bills for the month — some well ahead of time — and put a little extra toward my student loans and another credit card balance.
It wasn’t until the following week that I realized my overexcitement about paying down debt had left little to no money in my checking account for things like groceries, a tank of gas or lunch out with friends until my next paycheck. I also didn’t enough to put $100 in my savings account, which is something else I really need to start doing regularly.
My relief quickly reverted back into stress.
It’s not like I didn’t have a way to pay for things–my credit card balances are nearly nonexistent now — I just didn’t have much on my debit card. If I wanted (well, needed) to pay for day-to-day essentials until my next pay check, I’d have to put most of it on one of those credit cards I just paid off, which made me feel really guilty.
I’m always really dependent on my debit card, like many others in my generation. Even though I know you can use a credit card like a debit card and just pay the balance in full every month, the thought of doing that terrifies me.
Relying on my debit card for everyday expenses keeps my spending in check. I can’t overspend even if I want to, which is what could happen with a credit card that has a higher limit than my checking account balance. I typically just use my credit cards for small things here and there each month, not regular expenses such as medical co-pays, which is what happened just this past week after a string of doctor appointments.
Yes, I paid for medical care with credit cards. I feel irresponsible just writing that.
But I wasn’t being irresponsible; I was trying to make good financial decisions. They just backfired a bit and put me in a position where I needed to use credit cards more often than my debit card and that made me uneasy. If I had stuck to my original plan and just used my tax refund for debt payments, all would’ve been fine and I wouldn’t feel like I took three steps forward only to take two steps back.
Thankfully, I’ve now reached my next payday and all is well with my checking account balance once again. My bill and debt payments have been submitted — but not more than what my budget can handle — and the remaining spending dollars sit in my checking account, where they makes me feel most comfortable.
Moral of the story: Paying down debt is important, but if you do too much, too quickly or act in a way that makes you feel even more financially stressed, you’re not really helping yourself out.
I may want my debt gone tomorrow, but I have to be more realistic. Bummer.