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How to Live Your Life While Paying Off Debt

By Matt Timms

As a brand-new homeowner, Michael Timmerman was intent on paying off his mortgage as quickly as possible. Within two years, he managed to do just that — but it wasn't easy.

The Atlanta-based journalist worked an additional 10 hours a week, slashed his entertainment expenses in half, and negotiated lower car insurance payments. Yet even with all the compromises, Timmerman gave himself $100 in spending cash for every $5,000 he paid toward his debt. He used the money to buy anything he wanted, from a new pair of shoes to nice meals to a vacation. As he explains, his decision to pay off his mortgage wasn't about frugality, it was about freedom.

"The math of money is only one piece of your financial puzzle," says Jacquette M. Timmons, financial behaviorist and author of Financial Intimacy. "How you experience it emotionally is the other. This is especially true when it comes to paying off debt, because it can be emotionally draining to have all your resources going toward your debts and other obligations."

But tackling debt doesn't need to weigh down your daily life. As Timmerman discovered — and experts point out — there are some steps you can take to repay loans and still live comfortably.

Decide on your priorities

Spending on yourself while paying down debt can be a tricky balance to strike, and it helps to give priority to the things you value.

That's what Melanie Lockert discovered when she was working to pay off $68,000 in student loan debt. The Los Angeles-based author of Dear Debt: A Story About Breaking Up With Debt paid off the balance in four-and-a-half years but also carved out money for little luxuries, like a daily cup of coffee and an annual massage. "I decided those [kinds of perks] were worth it based on my values and how they made me feel," she says. "I side hustled a lot to pay off debt, so relaxing with a coffee or massage really helped."

Such small but meaningful perks are important, as they can offer a psychological boost, says Brian Kuhn, a certified financial planner at PSG Clarity in Fulton, MD. "But ideally, those luxuries are things that help you improve yourself and your ability to earn money, like something that provides stress relief or makes you healthier, or a hobby you could turn into an income-producing activity, for example," he adds.

Related: 7 Steps to De-Stress and Master Your Financial Health

Create breathing room in your budget

It's not always easy to find room in the budget for small luxuries, especially when a portion of your earnings are going toward debt repayment. But seeing exactly how you're spending your money is a good place to start, says Shawn Tydlaska, CFP, Founder and CEO of Ballast Point Financial Planning in Burlingame, CA. In the process, you can identify bills that can be negotiated or expenses that can be easily cut, such as a streaming service you forgot you signed up for or a subscription to a magazine you no longer read.

Also consider enlisting the help of budgeting apps like PocketGuard,* which collates your money, bills, and budget to calculate your income and monthly expenses, and uses forecasting technology to determine where you should spend and save.

Find ways to make your money go further

When resources are limited, it helps to look for ways to get the most out of your purchases. Using coupon codes and discount sites, for instance, can trim the cost of an item you're planning to buy. And in some cases, it may make sense to invest in certain pricier items now if they pay off in the long run.

Finding frugal ways to enjoy your favorite activities can also be effective. Instead of going to happy hour after work, Lockert bought an inexpensive bottle of wine and invited friends over. "Using a little bit of creativity, you can do what you love without spending a ton of money," she says.

Also consider creating a new stream of revenue for yourself, whether by taking on extra hours at work, like Timmerman did, or tapping into sharing services. There are plenty of opportunities: For example, skiers, surfers, and cyclists can rent out unused equipment on Splinlister*, while those with room to spare in the driveway can rent out a parking space through apps like JustPark*.

Related: Use Your Money to Improve Your Life

Remember your 'why'

When you're paying off debt, it can feel like the temptation to splurge on yourself is at every turn. To nip the urge to overspend, stay focused on the reasons why you wanted to rid yourself of debt in the first place, suggest Deacon Hayes, who repaid $52,000 of debt in 18 months and today runs the personal finance blog Well Kept Wallet*. "Why do you want to get out of debt?" he says. "Because that will motivate you to say, 'I'm going to order water instead of a beer' when you're out with friends at a restaurant."

"We all want financial freedom and the autonomy to, at some point, no longer be reliant on the same day job for financial support," agrees Cady North, CEO and financial advisor at North Financial Advisors. "The question is how bad do you want it? Do you want it more than getting a new car every few years or always having the latest gadgets?"

By examining your expenses, prioritizing the things you value, and making the most of what you earn, you can help strike a balance between paying off your debt and still enjoying life.

*Remember to always check the app terms and privacy policy before downloading these or any other apps and make sure you understand and are comfortable with the types of information collected and how it is used.

Matt Timms is a journalist based in the London area who writes about a range of business and finance-related topics and specializes in green business and sustainability.

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