(Just so you know, that’s Maslow’s Hierarchy of Needs up there.)
DH = Dear Husband
Combination of factors that led to success in our journey out of debt
I often reflect upon the fact that it took me SO LONG to adopt the basics of financial wisdom. From chaotic-overdraft-mode in my young adult, single years to hands-off, head-in-the-sand, leave-it-to-the-man denial through most of my married life . . . It took a combination of powerful factors to get me going in the right direction, starting in June 2012:
- 6 years of DH’s under/unemployment had made us extremely stressed by our finances from 2003-2009.
- DH had launched a home business in 2009, and it was succeeding.
- Those financially stressed years had been very tough on our marriage, but we’d stuck it out, and we were feeling a new hope together – for more than just the new business.
- In May of 2012, we listened to Dave Ramsey’s CD book, The Total Money Makeover. DH and I shared an “Ah-ha” moment: We were weighed down by our debts, and we had to get rid of them. We were psyched, energized by a new sense of power. We could pay off ALL the debts!
- Again thanks to Ramsey, we were inspired by a vision of how life would be once we were debt-free.
(The bold words are building blocks for the hierarchy coming up.)
With all of those forces in play, we began our journey out of debt. 4 years and 3 months later:
- we’ve paid off all consumer debts ($21,400)
- we’ve paid off all business debt ($80,800)
- we’ve paid off about a third of our June 2012 mortgage ($55,000)
- we’ve saved a full emergency fund (to cover 3-6 months of expenses in the case of unemployment)
Next month, our mortgage will go below $100,000. Ramsey says it takes the average household 7 years to get completely out of debt following his plan (which includes significant savings as well as debt repayment), and we’re on track.
Maslow’s Hierarcy of Needs ǁ Prudence Debtfree’s Hierarchy of Conditions for Debt Reduction
At New Year’s of 2013, just six months into our journey out of debt, I wrote a post in which I outlined a hierarchy of conditions for debt reduction. I modeled it after Maslow’s Hierarchy of Needs. “According to Maslow,” I wrote, “a person would live a fulfilled life to the extent that all needs were taken care of, from survival needs to needs for self-actualization.” There is an order to Maslow’s hierarchy. Basic needs have to be fulfilled before higher order needs stand a chance. Here is a summary of what I came up with as I created Prudence Debtfree’s Hierarchy of Conditions for Debt Reduction and the way it compared to Maslow:
- Maslow: Food, water, shelter, air. (To begin with, a fulfilled life means your survival needs are met.)
- Prudence: Pointed discomfort with personal debt. (Debt reduction requires you to have a distinct discomfort with your debt load.)
- Maslow: Safety, steady income, insurance in the case of misfortune. (To have a fulfilling life, your needs for security must be met.)
- Prudence: Stable, improving or innovative means of income. (To succeed at reducing you debt, it helps to have at least a steady amount of income. It helps even more to have an increasing amount of income.)
- Maslow: Belonging, love, family. (To experience fulfillment, you need the love of family or a closely-knit group of friends.)
- Prudence: Team support. (Your success in reducing debt is strongly linked to the support you get from your spouse/ family / friends .)
- Maslow: Self-worth, accomplishment. (Part of a fulfilled life is the self-respect that comes from achievement in something significant to you.)
- Prudence: Recognition of your own power. (You will succeed at reducing your debt when you believe you have the power to make it happen.)
- Maslow: Self-actualization. (A fulfilled life includes complete acceptance of yourself and the freedom to be creative.)
- Prudence: Inspiring vision of life after debt. (You will find it within yourself to reduce debt if you are inspired by a vision of a better life without debt.)
- When I experience an indifferent “Meh” about our goal, it’s a case of losing sight of the vision.
- When I feel defeated by an endless stream of big expenses, it’s a case of powerlessness.
- When I get frustrated because DH and I are butting financial heads, it’s a case of hopeless isolation – no team support.
- When I’m overcome by dread after a month or two of slow business for DH, it’s a case of income insecurity.
- When I’m lulled into complacency, it’s a case of losing that essential discomfort with debt.
I find that the more clarity I have about my own thought processes and feelings, the more effectively I’m able to channel them in the most constructive direction. Maslow’s Hierarchy gives insight into what might need to be addressed for fulfillment in your life. I hope that Prudence’s Hierarchy offers insight into what might need to be addressed in your debt-payoff mission.
Do you agree with this hierarchy theory? If not, how would you change it up? Are you able to see your own financial stumbling blocks as being connected to one or more of the levels of this hierarchy? Your comments are welcome.
Image courtesy of en.wikipedia.org