Is Paying Down Debt An All Or Nothing Mentality? No Thanks!

Paying down debt is a challenging task for many people.

It isn’t likely that someone magically ended up with massive amounts of debt overnight.

Normally it takes time to accumulate a large debt load.

Over that time, people develop some habits that just don’t work well with practical money management.

When you’ve developed bad habits it is often very difficult to change those habits.

However, once someone has hit rock bottom they’re normally reached a point where they realize they have to change. Some people change pretty drastically. These are the cases you normally read about on the news.

Is The All In Attitude A Good Idea?

Remember the Harvard grad who paid of $90,000 of student debt in about 7 months? It was a very inspiring story but I wouldn’t recommend following his path without putting in a ton of thought into it beforehand.

I think it is awesome his debt is gone but he pretty much went at it all in. To him there were no other options other than killing his debt as fast as possible.

When people truly go all in toward paying off their debt they can do some crazy things. They can sell all of their assets. I’m talking houses, retirement portfolios, cars, and many other things.

They do this without examining their situation fully just because they have tunnel vision and want their debt gone.

Yes, some of these items might be in excess and truly need to be sold. People don’t need McMansions, luxury cars, and crazy expensive clothes.

However, everyone needs a place to live, a way to get to work (and it might be the bus) and clothes to wear. Take some time to examine your situation because believe it or not, there are other options than going all in.

All Or Nothing Isn’t The Only Option For Paying Down Debt

Today, people seem to think the only options are to go all in or just pay the minimum payments and do nothing else. There are other options.

You can allocate a lot of your resources toward debt payoff and still spend some money in other areas of your life that are important to you.

All or nothing is probably the fastest way for paying down debt, but it isn’t the only way. All or nothing is extreme and can hurt you in many other ways.

If your sole focus in life is paying down debt you can miss a ton of other opportunities. You won’t always get a second shot at them. Don’t get me wrong. Paying down debt is important. Just don’t take it to an extreme unless you’re in an extreme situation.

So,what are some of these opportunities you’re missing out on if you’re going all in while you’re paying off debt?

Saving For Retirement

When people go all in while paying off debt they save nothing for retirement.

In fact, the Harvard grad tried to cash out his 401(k) (thankfully he couldn’t) as a starting point to pay his debt down. That would have been a huge mistake in my book.

He quit contributing 10% to his 401(k) and gave up any potential employer match, basically free money, he could have received.

Saving for retirement is very important and the younger you start the better. If you’re all in on paying off your debt you could miss many years of retirement savings when they count the most.

Due to the power of compounding, the money contributed in the earliest years of retirement savings have the most time and potential to grow.

My suggestion is to at least contribute enough money into your 401(k) to get the full employer match unless your debt is at extremely high interest rates of at least 10% or more.

If you don’t get an employer match then the decision is more difficult. Getting a 10% return isn’t expected, so if your debt is high interest rate debt I could see skipping saving for retirement for a short time.

Personally, once we get married we could take the all or nothing route to speed our student loan payoff.

I could sell everything in my Roth IRA. I’d have to pay a penalty because I haven’t had it for five years). I could quit contributing to my 401(k) and lose my employer match. If we did these things, we could have the student loan debt gone before the end of the year easily.

We’d have the weight off of our shoulders but it would cost a steep financial penalty. We’d be massively set back in terms of our retirement savings. All to save some interest payments on student loan debt that isn’t anywhere near a 10% interest rate.

That isn’t all we’d miss out on either.

Life’s Other Opportunities

Saving for retirement is a financial decision, but if you go all in on paying off debt you could miss out on a ton of other great and irreplaceable opportunities in life.

To quote one of my favorite movies, Ferris Bueller’s Day Off,

Life moves pretty fast. If you don’t stop and look around once in a while, you could miss it.

Paying down debt is important, but so is living your life!

If you’re so focused on cutting expenses and growing your income to the maximum potentially solely to pay off debt you could miss some important life events because you had no time or budget to take part in them.

You could miss out on the opportunity to meet your soul mate because you turned a down a friend’s invite to go out for a night on the town for the first time in months.

You could miss out on a once in a lifetime opportunity to see your absolute favorite band play a reunion tour.

You could miss a family member’s 90th birthday because you didn’t want to spend money on gas to drive the 3 hours to their hometown.

You could miss a sibling’s wedding because you didn’t want to spend $300 on a plane ticket to attend.

You could miss the opportunity to see a family member for the last time without knowing there won’t be another opportunity tomorrow.

There are ways you could make these things happen without spending a lot of money.

You can go out on the town and just drink water and use a coupon for dinner. You can still attend the concert, you just might have to sit in the cheap seats. You can car pool or take a bus to your family member’s 90th birthday.

You can suck it up and earn some extra cash to attend your sibling’s wedding, because they’ll never be getting married again.

We are on a mission to pay down my fiancee’s student loan debt but we’re still living our lives while we do it.

We still have cable and we still go out to eat. We have a budget for fun and we spend it on what we want to do. We have a budget for vacations but plan them to make our money count.

However, we also have a massive budget for paying down her student loans.

It is one of our main goals and you can definitely tell that from our budget. We put a majority of our cash flow into the loans, but we still manage to have fun while we’re working to pay that debt down.

We can’t wait until the loans are paid off, but we aren’t willing to sacrifice living our lives to have the loans paid off tomorrow.

You need to pay your debt down and you need to have a plan. Just remember that your plan doesn’t have to be all in unless you’re in an extreme situation. Life needs to be lived too!

How do you juggle paying down your debt versus living your life? Do you think that you go to go all in or nothing but the minimum payments? When would you make exceptions?

This post was originally posted on March 22, 2013.

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About Lance Cothern

Lance Cothern, a Certified Public Accountant (CPA) licensed in the Commonwealth of Virginia, is the founder of Money Manifesto. You can read more about him here or connect with him on Facebook, Twitter, Google+ or Pinterest.


  1. a.jewell says:

    wow! this topic has perfect timing and is exactly where I’m at. THANKS. the debt took some time to accumulate and will take some time and new habits to pay down. I’ve learned Consistency in payments and I’ve Committed to this process. Every little bit of money I can funnel towards paying down my debt makes a difference even if it’s not a lump sum. I liken it to an “eat the elephant (debt) one bite at a time” approach that works for me. Thanks again for this timely topic.

  2. Yep, I agree, that’s the way of it. I’ve got 2 daughters and so if I went all in, I would have to tell them no on uniforms for their sports or buying new clothes since they outgrow stuff… I think if you live alone and are single with no kids and are young ,it’s easier to go all in because you have no retirement saved that you could lose, you have no kids who depend on you for life, and all that. Most people probably should put more in than they do, but all in? No way, man.

  3. I like this post. I’m pretty hardcore with my debt repayment. I don’t contribute to retirement funds (I’m 23 and don’t have an employer match), I share a car with my fiancé, and we’re permanently house sitting for a family member so as to not pay rent.
    That said, we still take trips, we eat out occasionally, and we’re getting married (paid for by us with cash). I’m ok with those few indulgences because my debt is disappearing pretty quickly. If I owed more, I’d probably continue to contribute to retirement and life a more normal life, because restricting life for long periods of time is a recipe for falling off the wagon. As is, I’m fine with restricting myself for a few years in order to be debt free.

  4. Too often, in one’s effort to get rid of debt they lose sight of what is really important. In almost all cases, the contribution to retirement will grow at a better return than the interest paid on debt.

  5. Financial Black Sheep says:

    All in sucks and you really do have to live life. At least have the basics to save your butt in case you cannot pay off all your debt as planned. Have an emergency fund (OK I gambled on this and didn’t have one), retirement fund and some sort of fun money so life isn’t all focus and no play. Many people get into debt every day, it’s how we get out of debt that makes us stronger so in the future we won’t go back into debt.

  6. We map out what we want to spend and save each month, and then amounts earned beyond that go to debt repayment (it’s debt from buying investment properties). But what we want to spend definitely includes enough money for living life and having fun along the way.

  7. I too am a BIG fan of NOT paying down debt quickly.

    Provided of course your carrying cost is less than the gains you’re making off the borrowed money.

    Fixed loans in FIAT currency deflate over time so yes you pay more interest over time, but the value of those dollars deflates and has less buying power. If your cost of borrowing is less than inflation (which is entirely possible in this current economic environment) then it’s a huge opportunity cost to pay it off. Technically you’re MAKING money on the loan… as odd as that may sound.

  8. For me I think there has to be a balance to it as well and you have to prioritize which events make sense to attend and which ones you can skip on. If you are up to you ears in debt, then it also doesn’t make sense to take a vacation every year. I personally would never miss a siblings wedding, but a distant cousins wedding I would miss for the sake of debt. Right now I am taking vacations every other year because I am paying down student loans.

  9. I’m with you on this one. Our debt paydown isn’t as intense as others, but fits our lifestyle well. That being said, I’m still excited to kill the debt as quickly as posisble!

  10. Interesting post. I think you make some valid points, but I also think that when people are just opening up to the idea that they have a problem, you don’t tell them that it’s ok to keep creating more of a problem. Overspending and overindulging on lifestyle is what got a lot of people where they are today. If they want to go whole hog for a year or two, what’s wrong with that?

    Personally, my wife and I paid off over $27,000 in student loans and it took us 2 years to do it because we went a little slower. There is an opportunity cost for everything. I think the way that you guys are doing it is great! Live a little, pay off a lot! Keep that up and continue that mentality into your savings/retirement funding and you will be set!

    The danger that my wife and I ran into was that we were trying to do 6 different things all at once rather than just focusing on one thing at a time. We tried to fund college for our kids, our emergency fund, paying off debt, saving for a house, retirement savings, as well as trying to fund lifestyle all at once. It really didn’t get us anywhere but treading water. When we started cutting back everything but the debt, that’s when we really started to see traction. If you cut back enough, you won’t be sacrificing that long and then you will free up enough cash flow to make up the ground that you “lost” during the debt payoff.

    • It is a fine balance for sure. What bothers me the most is when people start selling retirement investments to pay off credit card debt. That can be an awful mistake you can’t take back. We did go pretty full force in paying off debt with our available income, but we didn’t sell everything we owned to start out.

  11. Interesting topic.

    For me I felt that I needed to go “all in” so that I could start from a fresh slate. I accumulated more debt than I could handle, it took great sacrifice for me to level myself out.

    I chose to sell my house, although it was a good investment because I bought it as a foreclosure and I am basically flipping it for a small profit in only 1 years time.

    I am choosing to move to Florida with my fiance and rent instead as I feel that this allows me to keep my bills more simple and takes away from all of the hidden costs of owning a home. I like the idea of paying a flat rate each month, having no maintenance, and also added utilities for a fraction of what I was paying for my house, although this may not be the case for some people. Not to mention, rent in Florida is much cheaper than where I’m from.

    Selling my home is allowing me to clean my slate and eliminate all of the debt that I accumulated. I got rid of a car payment, and once my house sells I will be paying down my last 2 credit cards, and paying off a high interest personal loan.

    For me, there were multiple factors leading up to my decision to sell my home and move to Florida. I want to live in Florida since I enjoy the beach, and winters are mild. I also want to simplify my lifestyle by having low cost rent and pursuing what is important to me. I was working at a job for 4 years that paid very well, but at the end of the day, I wasn’t happy there. My job was the only thing paying my bills. I wouldn’t have found another job in my area making enough money to support my bills.

    Ultimately it came down to selling my home so that I could quit my job and move to a desirable location, and chose to do whatever it is that I want to do. No longer letting a job hold me down, even if it requires me to go “all in” and sell all of my possessions.

    Everyone’s situation is different, and I agree that there are smart ways to approach your debt without sacrificing your quality of life. For me it came down to the stress and feeling unhappy even though I appeared to have it all.

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