Welcome back to GB 123! Today, we’ll be discussing the topic of setbacks. Of course we hope that you’ll make it through your debt payoff journey unscathed, but the reality is many of us will face setbacks, both large and small, on our way towards becoming debt-free.
Before we get into the bulk of today’s discussion, check out the chart below for a recap on where you are on your debt payoff journey:
You can see you’ve done a lot so far! The road to debt freedom is long and not always straightforward, so remember to celebrate how far you’ve come and the victories that you’ve won along the way.
How one person dealt with a setback
Most of us will experience setbacks one way or another, but they don’t have to completely derail our financial plans.
Karisa shared her experience of dealing with a setback she wasn’t prepared for when she was paying down her debt.
“It started when I was at work. I was feeling some chest pains and had some numbness in my arm. I knew I needed to get that checked out, so I asked my boss if she could take me to the emergency room. Everything ended up being fine. After being there only an hour or so, I left and only needed to pay for the $150 copay. I assumed there would be an additional amount that I’d need to pay, but I thought it would be reasonably small. I mean, I have insurance.
“A few weeks later, I got hit with a $2,000 bill! So while the bill wasn’t a surprise (I anticipated getting one), what was surprising was just how expensive the bill was. That pulled me off track for a few months, and it was hard to get back on the horse.”
Yikes, that sounds tough!
Even though Karisa had some savings set aside for emergencies, she didn’t feel like this was necessarily the kind of “emergency” that fund was meant to cover. Her emergency fund was for things like losing her job or taking other hits to her income. To get this bill paid, that meant she’d need to add it onto her list of debts to tackle with her Debt Snowball plan. Ouch!
Karisa wasn’t expecting that her debt balance would grow while she was tackling debt, but it did. Debt felt so inescapable at that point that she wondered what the point was in trying to pay it off at all. She felt so disappointed and discouraged by this setback that her financial plans did get derailed.
After taking a few months off of her Debt Snowball plan, Karisa was ready to get back on the horse. She started to realize that while it was frustrating that she had to take on more debt, she still had made so much progress overall. She didn’t want to totally lose the momentum that she had gained at the beginning of her journey, and she certainly didn’t want to let herself fall back into her old spending habits. Even though she knew she would be debt-free by her original target date, she knew she needed to get back on the horse and (re)start her debt plan.
As bad as that setback must have felt when Karisa was going through it, you can see she was still able to overcome it! When we experience setbacks, oftentimes it’s tempting to just give up entirely, and Karisa did for a bit too. We tell ourselves that it’s not worth it because we’re already off-track. But instead of forgoing her plan forever, Karisa eventually decided to get back on the horse and resume her debt snowball plan.
The question now is, how could have Karisa prepared for this setback? One option would have been to have more robust savings specifically for “surprise” medical expenses. And the idea for saving for big expenses is something we talk about a lot at Goodbudget—it’s actually part of our core beliefs.
Of course, having robust savings when paying down debt might not always make sense, and that might have been something Karisa considered when she was considering paying down debt.
Another way Karisa could have been prepared would have been to create a plan for setbacks ahead of time. The reality is, it might not have made sense for Karisa to bulk up her savings before paying down debt. But by thinking through some ways she could deal with financial setbacks before starting her journey might have helped to keep her on track when she experienced one.
Ultimately, acknowledging that setbacks can happen and then making whatever preparations we can for them helps us get back on track with our goals when they do happen.
Now, we want to know, what kinds of setbacks do you think you might encounter on your debt payoff journey? How do you plan to get back on track if and when you stumble off? Leave a comment and let us know!