Setting a Debt Free Date

I consider myself a goal-oriented person, but I think we can all benefit from creating objectives and working toward specific achievements. This is perhaps most beneficial in financial situations because there are so many ways to waver off the path on the way to becoming debt free.

Your debt free date is your deadline, the day on which you want to have resolved all outstanding accounts with various creditors so you can move forward with a clean slate. Without such a goal in mind, what will keep you from procrastinating payments-or worse, incurring new debts?

Set a Realistic Debt Free Date

If you earn $50,000 per year and you've accumulated $200,000 in debt, you probably won't be able to get rid of it all in two years. It's just not feasible, absent winning the lottery or some other unexpected windfall. The purpose of a debt free date is not to strain credulity but to give yourself a reasonable period of time in which to get rid of your debt.

The best way to come up with your debt free date is to set a budget now. Figure out how much you spend on various bills and other expenses and set aside a percentage of your income to put toward paying off debts. You might not be able to pinpoint an exact date with this method because calculating interest and other factors is difficult, but you'll be able to narrow down a window of time.

When I set my debt free date, I used a budget based on my income at that time and extended the deadline three months. I knew I needed a cushion in case my creditors increase interest rates or I incurred unexpected expenses.

Don't Deprive Yourself

In anticipation of your debt free date, it's common to want to limit your lifestyle to the bare essentials. Resist that urge because, after stripping yourself of all luxuries and pleasures, you'll quickly lose motivation to become debt free. Trust me, I've been there.

It is a good idea to limit unnecessary expenses. Brew coffee at home instead of stopping at the corner coffee shop. Get rid of cable and watch your favorite TV shows on the Internet instead. Minimize driving so you use less gas. But don't get rid of everything you love.

Books, for example, are my weakness. While I was working toward my debt free date, I at first started re-reading every volume in my personal library, convinced it was wrong to purchase new reading material for personal pleasure. Eventually, however, I realized that reading provided much-needed stress relief, and that if I didn't splurge at the book store on occasion I was going to go insane.

I cut down on the cost of reading by shopping at used book stores and taking advantage of sales and coupons. But I didn't cut it out entirely because it would have actually hindered my path toward my debt free date.

Reward All Milestones

For many people, setting a debt free date means looking ahead years in the future. If you plan to celebrate only that final achievement, you'll begin to feel as though you're working toward a pipe dream rather than a realistic goal.

Set regular milestones on the road to your debt free date. For example, you might plan a celebration after you've gotten to the quarter, half, and three-quarter marks, assuming you're still on target.

And you don't have to throw a party or make an extravagant purchase to celebrate. Something small but meaningful will fuel your energy until the next milestone. Take a (well-budgeted) weekend vacation, plan a date night with your spouse, or take your family to the beach. Just remember why you're celebrating.

Setting a debt free date might not seem significant when you first start out, but eventually you'll see that the deadline helps keep you going. The more you pay down on your debts, the more excited you'll become at the prospect of chipping away some more.