Warning: Debt freedom can make you complacent!

By Kim Hall | Finances & Careers

debt freedom can make you complacent“We feel so stupid. What we were thinking? We are so much smarter than this.”

These comments came out of a past conversation with a fellow Financial Peace University graduate.

The couple, with college degrees, student loans, and decent jobs, had taken the baby steps to heart and began to budget their way to debt freedom.

In spite of continued pressure from their friends and family, they remained intrepid apartment dwellers, patiently waiting and building towards a brighter future.

They got debt-free, and when they felt ready, and after much searching and consideration, they bought a house.

Much later they began to panic, as they realized they weren’t ready financially for the true cost of owning the home they chose.

What happened?

 They learned debt freedom can make you complacent.

When my husband and I were working our way towards debt freedom, I read a cautionary tale from a fellow FPU Facilitator about moving beyond Baby Step 3.

At that point, you are a freshly minted debt free couple—woohoo!—and have a fully funded emergency fund.

He wrote that the inclination is strong to celebrate your hard-won progress by letting go of the tight grip you’ve had on your budget and loosening the purse strings.

You tell yourself you deserve it, you’ve worked so hard and for so long, and besides, you have so much more disposable income now!

Upon further conversation with the aforementioned worried home owner, this is what happened to them.

Truth be told, the complacency happened to us, too.

Frankly, I was shocked at how easy it was to slip into spending more and tracking less.

The start of the slide to complacency: Losing track of the true outgo

These unhappy homeowners started to do what they termed retroactive budgeting.

That’s the practice of logging into your budgeting software every month or six, and just matching your budget to what you spent.

It’s just so much faster, easier, and less limiting to do it that way. 🙂

Again, I speak from personal experience, too.

My husband and I have been guilty of this, and after a very, very long stretch of being pretty focused, we just did it this past month. Ugh.

But how do you miscalculate on a house purchase?

You begin to do what I call winging it, speaking from my own pre-FPU experience and that of my fellow FPU learners.

  • You are already not keeping really close tabs on your finances—retroactive budgeting, if you are budgeting at all—so you are missing the big picture.
  • The mental list of potential current and future expenses for your dream home is fuzzy and incomplete, but it’s probably close enough.
  • You lose perspective on what even a good home price means to your budget, so you don’t really crunch the numbers.
  • You want to have a family, and you neglect to fully factor those expenses and possible loss of income into your decision.
  • The bank is willing to lend you much more than you would need, so that must mean the home is well within your grasp.
  • There aren’t a lot of cute and decent starter homes in your city that are in good neighborhoods with a semi-reasonable commute, so when one comes up you just have to grab it.
  • You suspect your current income won’t be quite enough, but assume your future self will get raises and be able to cover expenses.
  • You love the house so much you completely lose your Walk  Away Power.

Basically, I believe you allow your inner Free Spirit the upper hand in making your financial decisions without the benefit and balance of input from your inner Nerd.

Consequently, you begin to regress to ostrich status, to that time before budgets, when you would stick your head in the sand and hope everything was going to somehow turn out alright.

Moving away from complacency

There are different paths back to active financial management and better decision-making.

Remember this is nothing more than a course correction for your good ship Home Budget.

As captain, you monitor your progress and regularly tweak your course to keep your craft headed in the right direction.

The typical correction doesn’t require returning to port and beginning again, although there are rare moments when that might the right decision.

Here are five places to start if you have become complacent:

Re-calibrate your perspective on budgeting. If you’ve gone back to thinking about budgets as being more like cod liver oil than peaches and cream, read this for inspiration.

Set yourself up for convenience. If budgeting is a hassle, you will avoid it, so you have to find a system that works for you. Dustin shares about YNAB here, a terrific piece of budgeting software. It’s what my hubbie and I use and enthusiastically recommend. Plus, it’s now free for college students. Hooray for free!

Take on a like-minded mentor who will teach and encourage you. Having someone to call who has walked in your shoes and is now walking the talk is priceless for providing guidance to help you move forward in your financial goals.

Ask someone to be your financial accountability partner. The thought of being transparent about your salary and expenses may make you hyperventilate, but I can’t recommend this enough if you and your spouse have difficulty climbing out of the complacency trap. This person will help you stay on track with your goals, but be sure this person can be trusted with your information. This is not a task to be taken on lightly. We have done it for other couples, and they have told us the accountability was critical to their progress.

Find experts to help you determine the true cost of purchases, especially for a home. As painful as it can be to see the cost of a potential purchase like a home spiral out of reach on paper, it is more painful to have the costs pile up, tip over, and bury you in real life.

Make no mistake: Debt freedom is a worthy destination and one that will bring you much joy. Like any journey, however, the better aware and prepared you are, the easier it is to successfully navigate the twists, turns and potential pitfalls.

Comment: What tricks and tips have you used to navigate through the bumps along the way to and beyond debt freedom?

Photo: Marcelo Jannuzzi via Flickr

About the Author

Kim Hall created Too Darn Happy to help you build stronger and more joyful relationships through offerings of fresh perspectives and practical advice. Having been a wife for thirty years and a mom for almost as long to two daughters, she also shares occasional cautionary tales of her own character building life experiences. Kim recently authored her first ebook, Practicing Gratitude and Discovering Joy-Thirty Days to a Happier You. You can connect with Kim on Twitter, Facebook, and Pinterest, too!

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