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How I Budget in the FUN Stuff (While Still in Debt)

The following is a guest post from Jeff of Sustainable Life Blog.  Feel free to check it out!

I’m in debt, which stinks. The best part about being in debt is dreaming what you’ll do with all that “extra” money you’ll have when get out of it. I am doing this a lot as well. It’s not so bad. Now that I’ve gotten my expenses under control finances have gotten much easier for me, I actually like doing them. I come across what I think is the hardest part frequently.

For me the hardest part is when you dream of spending your hard earned cash on something other than debt repayment. Like I mentioned earlier, I do this a lot. To make my debt repayment journey easier, I often create small goals for myself and try to reward myself accordingly, with something like a camping trip or a fishing trip (instead of working all weekend).

Every once in a while (so far just once) you’ll cross a milestone that deserves something more than 1 weekend away. For me, this milestone was paying off my credit cards (all of them) once and for all!

I recently completed this, and decided to reward myself for it. Luckly for me, I made finding a reward a bit easier when I was beginning to pay off my debts. When I first realized how much money I owed to my credit cards and what interest I was paying, I quickly realized that was not going to work. So I looked around for some balance transfer credit cards and I found one that gave airline rewards to boot!

I quickly calculated that if I transfered up to the limit on this card, paid it off I could have a free flight + a few extra credits towards a second one. The fact that the interest rate was about 10 points lower on this card was just icing on the cake.

I made the transfer and had the balance paid off in about 5 months. I was feeling great and moved on to the next part of my debt with my snowball. Fast forward 9 months, and I check my rewards account. It looks like the ticket is going to expire at the end of August, 2010, and I really don’t want it to go to waste.

Unfortunately, I had not finished paying off all of my debts yet, so was at a crossroads. I could:

  1. Let the Ticket expire and continue to pay down my debt
  2. Use the ticket to go somewhere.

If I let the ticket expire, there would have been no point in opening the card for the balance transfer in the first place. I would have gotten a better interest rate, but still, I wanted the ticket. I opened it for the free airplane ticket, and I want to use it. I also have a particular aversion to wasting things, especially in this case. Not using the ticket would make me feel like the credit card company won, and I don’t want that. I could also tweak my debt repayment budget for a few months, diverting some cash from debt repayment into a savings account for vacations.

I decided to compromise, and tell myself that if 1 of my other debts is paid off before the ticket expires and I have the cash available, I can go. I feel like I’ve offered a reasonable compromise to myself, and it looks like I’ll be able to hit my goal. Here are some tips to help you budget in the fun stuff

  1. Use your debt to your advantage – I was able to get a free airline ticket by making a credit card balance transfer to a card with a lower interest rate. When I made this transfer, I saved money on interest payments AND was able to get something tangible out of it. (I did this before the CARD act, and I know these cards are more difficult to get now.) It doesn’t have to be a plane ticket, but look to get something out of your debt instead of just paying interest. Let me make it clear that you should NOT go into debt for these rewards.
  2. Use it as a carrot – Find a difficult but attainable goal on your road to debt freedom. It could be something like “Increase debt snowball from $1,300 to $1,500 a month for 4 months” If you meet your goal, reward yourself with your airline ticket.
  3. Reinforce good habits – This can help you keep your good habits and not go into debt for your next vacation. Prepare a budget for the trip and put enough money aside (every payday) to make sure you’ve got enough (and probably a bit extra) by the time you’re ready to fly. This will be easier to do once you’re out of debt, and you’ll already have practice!
  4. Enjoy the Trip – I can’t stress this enough. When I used this exact method on my most recent trip, I didn’t enjoy my vacation as much as I could have. Every once in a while (usually when the cash register rang), I would think about how much money I’ve spent on the trip and how that money could be going to debt. Instead, enjoy the fact that you won’t have a “credit hangover” from this vacation cause it’s paid for up front.

So, next time you’re looking for a reward for paying off your debt, don’t forget to look at leveraging you debt to produce the reward. Sure, you’ll still be in debt, but you may as well try to get something out of it. With these steps, you can use your reward and set good habits for your future debt free self. Good luck!

Crystal’s Questions:
Do you reward yourself for accomplishing personal finance goals like debt repayment?  If so, how?

FYI:  I worked at a dead end cubicle job from 2005-2011 for about $30,000 per year.  I went self-employed in July 2011 and make between $70,000-$90,000 through blogging, professional pet sitting, hubby's reffing, and our rental home.  If you’d like to start your own site (link to my free step-by-step guide), I highly suggest checking out Bluehost (my referral link with a nice discount for you, PLUS a free custom header banner from me!).  Please contact me any time at budgetingfunstuff*at*gmail*dot*com with questions or just to brainstorm! I’d love to help!
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24 thoughts on “How I Budget in the FUN Stuff (While Still in Debt)

  1. Back when we were poor in graduate school, we would rent ourselves out as research subjects. Rather than use that money for debt repayment or general expenses, we would eat out with it. So earning extra money would = rare reward.

  2. I blew it! I never did celebrate any debt repayment thus far. I still remember how liberated I felt when my student loans were all paid off, even though I was down to paying just 50 dollars a month.

    My last debt is my mortgage. I think I will be celebrating when that is paid off.

  3. @BFS Not really… they were mostly economic experiments. They did pay well though.

    I did do some fun experiments in college one summer where they did various things to torture me and then I’d spit into a vial at $10/vial, 3 vials per experiment. I think they were measuring cortisol. Today even thinking about Dentyne Ice makes me salivate.

  4. After I paid off my student loans, I bought a surround sound system. I still have it 13 years later, but it was my “reward.” I haven’t done it with any other milestones..I’ll have to think of what I’ll do when the last mortgage is gone. I’m counting down the months.

  5. Interesting post. Rewarding yourself is really a good thing. It’s nice to have this kind of incentive to your self or to have some form of self-motivation so you have something to look forward to when you accomplish the goal. At work, we are rewarded by our boss for our accomplishments so we should do the same thing to ourselves.

  6. @Jenna, me too.

    @Ken, based on your Gravatar, I bet you could reward yourself with travel or photography equipment. 🙂

    @frugalscholar, I must be one of the only personal finance bloggers that hasn’t listened to or read Dave Ramsey…what is is hair-shirt frugality mentality?

  7. Great guest post! I loved the “treat it like a carrot” point. I think you found a great way to balance your financial life while still managing to budget in some fun stuff 🙂 I think another great catalyst for keeping that dept repayment snowball growing is surrounding yourself with supportive people. It’s a lot easier to manage and emotional handle what your doing when you can associate with others in a similar boat. Competition can be a positive thing too! It’s nice to not only reward yourself but to get reinforcement from the support of a community – that’s how you get better. It’s all about people helping people 🙂

  8. @Nunzio, I think my competitive spirit is what keeps me in line most of the time. I was never as frugal as I am after reading other personal finance blogs! 🙂

    @Invest It Wisely, good point. Vacations are just more fun when you don’t have debt hanging over your head every time you buy a Pina Colada…

  9. I used mortgage milestones for marker points when we went below certain financial numbers. After we crossed this points, we’d go out and have a meal at a fancier restaurant.

    So when we got below $100,000 for the amount on our mortgage, we went to an expensive restaurant. The same with $75,000 and $50,000… etc.

    After all, you need the entire family onboard to become totally debt free.

  10. Nice story and message. In regards to your saving for vacations bit, I just put that message to work. I have a cruise and plane ticket to Miami completely paid for, and it’s not until November. Not only that, but I am also spotting my friend a few hundred… all because I’ve been saving for this.

  11. I’m currently in the process of saving up for a holiday!

    My brother and I are planning a 10 day trip to Vanuatu at the end of January, so I’m saving an amount each fortnight, as well as half my tax refund, that should be enough to cover flights, accomodation, tours, meals, everything, with some left over for spending money!

    The amount was calculated by figuring out how much I needed to save, and dividing that over the remaining pay periods. It’s encouraging to see this amount increase each payday and to have a short term goal that I’ll be able to get tangible results from!

  12. Very nice post. Rewarding yourself is really a good thought. It’s best to have this kind of incentive to your self or to have some form of self-motivation so you have something to look forward to when you accomplish the goal. At work, we are rewarded by our boss for our accomplishments so we should do the same thing to ourselves.

  13. @Money Reasons, hmmm. We just got the mortgage below $70,000 and I am in the mood for something nice… 🙂

    @MFO, you’re a good friend. Have a great trip!

    @Paul, I also find that it’s easier for me to get excited about short-term goals rather than the ones that are so far in the future. I try to break down our longer goals like retirement into annual goals instead simply so I don’t start blowing it off, lol.

    Have fun in Vanuatu! I have no idea where that is but I’ll Google it.

  14. Since ’07 I’ve been obsessed with creating prosperity over very short periods of time. Now i finally comprehend that there is no shortcut to success. Now I’m obsessed with not wasting time 🙂

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