As a holistic financial and debt coach, I see debts of all kinds. But one thing remains consistent, and that’s the “debt mindset”, and it is toxic.  Let’s talk about how I work with my clients to heal their debt mindset and make paying off (and staying out) debt easier and easier.

Approximate read time: 8 minutes (10-20 if you choose to do the worksheet)

We’ve all been there… that one bill comes in and we set it aside. “I’ll look at that later,” we tell ourselves, but there it sits. Soon there’s a little collection of unopened bills, late notices from credit cards, and random junk mail… like a little black hole with its own gravity, pulling everything towards it but also generating inertia. Pretty soon that stack of unopened bills starts to feel like an accusation.

“What the hell is wrong with me?” You might say to yourself.

The good news is that there is nothing wrong with you.

And I know it seems like the logical solution to debt seems like a “rip the bandaid off” moment, or a “get my shit together” moment, but it’s not that simple. Nothing with money ever is. It’s never so simple as just opening the mail, just making more money, or just restricting yourself.

But changing your mindset around debt, finally having some transparency on your debt, and then developing a customized, adaptable plan for paying it off is closer than you might think. And you don’t need more income to change your debt mindset!

In this article, we’ll be discussing mindsets around debt, but I do encourage you to work with a financial/ debt coach to build your own customized, adaptable spending/budgeting plan to support your debt payoff strategy.

Debt Can Be Traumatic

Our culture has an unhealthy obsession with debt. It is the single most available financial instrument for most of us, and can simultaneously be a benefit to our lives and be deeply toxic.

We’ve been fed a line of bullshit about debt too. We’ve been told that some debt is good and some is bad. This is a deeply emotional lie. Debt is neither good nor bad, it’s just another financial tool.

For the “bad” debt, we’ve been told to never EVER get in debt, and if you do, you better restrict yourself until you are out of debt. “Bad” debt is dirty, and you’re dirty and dumb because you got yourself into it.

Conventional financial “wisdom” tells us there is a right and wrong way to behave with your money without telling us how to make those perfectly right decisions. Oh, you didn’t make the right decision? Well, you just need to make more money, work harder, take this seriously, or get your shit together.

“Good” debt isn’t much better. It’s an equally emotional, gut reaction. Go ahead and get some good debt, conventional wisdom says. In fact, if you don’t get a mortgage you’re not making good financial choices. “Buy a house” has been conventional financial wisdom for generations now, and this is dangerously simplistic financial advice.

Add to that the false perception that everyone else except you is making good financial decisions, and the shame and judgment around debt can result in hesitation, procrastination, and eventually isolation.

Debt is deeply wound up with anxiety, shame, and guilt.

All of this emotion leads to lighting-fast gut reactions that are rarely good long-term choices. We’ll talk more about this in a bit, but what we’re after when considering taking on debt or how to pay it off is thoughtfulness, not reactivity.

Long-term anxiety, guilt, shame, and self-punishment can lead to financial trauma.

Why Talking About Financial Trauma is Important Whether You’re Working With a Debt Coach or Not

Trauma-informed means that instead of asking “What’s wrong with you?”, I get to ask “What happened to you?” It means that we can practice personal responsibility while being accepting and patient with ourselves.

Trauma-informed does not mean trauma-focused or trauma-avoidant. It means being aware of your behavior, actions, and reactions around debt, and practicing patience with yourself. And it means learning to trust yourself, not just with debt, but with every part of your financial life.

Four Ways to Change Your Debt Mindset According to a Debt Coach

-Practice awareness without judgment
-Tell your debt story
-Evaluate debt reduction/payoff plans, not yourself
-Build an adaptive, personalized budget

Changing your debt mindset: Practice awareness without judgment

This is probably the single most important part of changing your mindset around debt. Judging and shaming ourselves about our debt is easy, and if that were going to work we’d all be fine by now.

Shame and judgment only increase pressure, and our brains do not make good, thoughtful, future-focused decisions when we feel pressured. Self-judgment kills objectivity, creativity, and focus. The self-judgy mindset is deeply selfish.

Shame and judgment don’t work. So let’s practice being aware of your behavior (financial and otherwise) WITHOUT judgment.
Awareness without judgment (grace) means we get a little break from the pressure and urgency that stokes impatience.

Storytime! As a Debt Coach, this is the story I use to teach my clients how to be aware of their behavior without judgment.

Me: OK, I’d like you to imagine a scientist out in the wild, they’ve got their pith helmet and their khaki clothes and their little notebook and all that… can you see it?

Client: (unsure of where this is going) Yeeeah?

Me: OK, so this scientist is out in nature observing some wild animals and taking notes. So as the scientist is observing, are they trying to change the wild animal’s behavior?

Client: Not if they’re a good scientist.

Me: Exactly! What is the scientist going to do?

Client: I guess just observe and take notes?

Me: Yup. That’s it! Ok so now the scientist sees the animal eat something gross. Is the scientist going to write in their notes “Oh my god this animal is so disgusting I can’t believe it just ate all of that rotten, moldy elephant poop!!!”?

Client: (chuckling) No.

Me: What would the scientist actually do?

Client: They’d just write down “The animal ate elephant poop”.

Me: Precisely! No judgment, just an observation. Next, let’s say the scientist notices that the animal has changed its behavior in some way. Would the scientist try to change the wild animal’s behavior back again?

Client: No.

Me: Right, the scientist would just observe and take notes. Ok so now let’s say the scientist notices that their presence (the scientist’s) seems to be agitating the animal or making it change its behavior. What would the scientist do?

Client: They would… leave?

Me: Exactly! They would back off, and they’d likely take careful notes on what happened so that they don’t do that again. Is this making sense so far?

Client: Yes, I think so.

Me: Great, now I’d like you to imagine that you are both a wild animal and the scientist who is observing the wild animal. If possible I don’t want you to change your behavior, ok? We’ll get to that point, but for now, if we want nice, clean data, please don’t change your behavior… just observe it. You just keep doing “you” things! Does that make sense?

Client: I guess so.

Me: Let’s say you notice that you feel guilty or ashamed when a credit card bill comes. What would scientist-you do at that point?

Client: Just make a note of it?

Me: Yes! And it doesn’t have to be a written note, although it could be. What do you think you’ll notice as you start observing your reactions and responses to debt without correcting or shaming yourself?

Client: Maybe I can think back in time about what caused the debt in the first place.

Me: Fantastic! That’s a good pattern to know about.

Only by being aware of your actions and reactions around your debt WITHOUT judging yourself can you first change your relationship with debt, and then begin to reduce it.

What would your life look like if you could be just a little more aware of your financial behaviors without judging yourself? What would your debt look like if you could trust yourself with your money just a little more than you do now?

Changing Your Debt Mindset: Tell Your Debt Story

If you’re just starting to practice being aware of your money mindset without judgment, please be gentle with yourself. Writing out the story of your relationship with debt means you get a chance to slow down. Take your time. Grab a piece of paper, or download the worksheet here:

Step one: What is a belief, narrative, or message have you heard or internalized about debt?

Step two: On a scale from one to ten, how certain are you that this narrative is true? (one is not at all certain, ten is very certain)

Step three: What is the purpose of this narrative? What is it trying to protect you from? What is it trying to motivate you to do/not do?

Step four: What are the actual, negative outcomes of this narrative?

Step five: What are some other ways you could get some of the protections from step three without the negative outcomes of step four?

By writing out your debt story you get the chance to examine the narratives and messaging that may not actually be serving you.

You get to decide if a narrative or mindset is serving you. If the message that rolls around in your head isn’t useful, you can change it, replace it, or throw it out the window. Very often the old messages we’ve heard or said a million times get stuck in our heads as truth. We will often deploy something called confirmation bias to look for evidence that the narrative we hold as true IS true.

Just because you’ve heard a message a million times doesn’t mean it’s true.

Changing Your Debt Mindset: Evaluate Debt Reduction/Payoff Plans, Not Yourself

There are about as many ways to pay off debt as there are people with debt. One expert online says you should pay off the highest to lowest interest rate, another says shortest to longest payoff, another says to pay off the lowest to highest balance, and another says just get a consolidation loan. And then there’s the advice that it doesn’t matter, just pick one and for the love of god stick to it and don’t take on more debt. (eye roll)

Every strategy has upsides and risks, and there is no one right way to do a debt payoff.

How YOU pay off your debt will depend on a great number of factors and can’t be prescribed to you by some expert, especially me. So how do I help my clients strategically pay down debt?

Well, we spend some time playing with this nifty debt calculator that lets us run through scenarios, play around with what it looks like to take on more debt, apply lump sums, and play with the order the debt is paid off.

Playing with a calculator like this and thinking through scenarios means you’re testing out the debt-payoff strategy before you even start it. You’re testing to see if that strategy will fit your life. If it doesn’t fit your life, it won’t work.

If you try to fit your life into any structure, system, or strategy, that strategy WILL fail. And that’s no fault of yours. For too long we’ve tried to square-peg-round-hole our finances. No more.

Build systems around yourself that comply with you. Evaluate them and then pass/fail them based only on how well those systems serve you.

Changing your debt mindset: Build an Adaptive, Personalized Budget

An adaptive, evolving, customized budget cannot be downloaded off the internet and then plugged into your life. Those premade, prescriptive, restrictive budgets might work for you for a month, and then your life changes and it won’t keep up. Your June probably looks different than your December, for example, and you’ll need a slightly different system for each month.

Your life WILL change. And I want change for you! Imagine how boring it would be if you could successfully spend exactly the same amount of money on the exact same things month after month, year after year.

Your budget, spending plan, or whatever you call it, MUST change with you. Whether the changes to your life are choices you made or choices that were made for you, your budget must adapt.

And it must be customized TO YOU. Which means it must comply with your life.

A customized budget gets easier to use over time, not harder, and it should be intuitive.

A Quick Note on Savings

There is a bit of conventional “wisdom” out there that says you shouldn’t start building your savings until you’ve paid off your debt. This is typically touted because the interest rates on even high-earning savings accounts are small potatoes compared to the interest rate you’re paying on debt. While that’s a valid point, it’s not sustainable.

If you want to prevent yourself from taking on more debt, the single biggest thing you can do is build savings. Even if you’re building at the rate of $10 a month, it matters.
Think of savings as the anti-debt.

In Conclusion

Paying off debt has less to do with being responsible, taking it seriously, or making more money. It has everything to do with your debt mindset, the messaging you’ve internalized, financial trauma, and the money system you build around yourself.

Imagine I’m waving my magic wand and POOF you’ve got a good system for paying down your debt, you’re saving a little, you’ve got an intuitive budget/spending plan and you’re learning to trust yourself with your money…

How would life like that feel differently than it feels right now? What would be able to accomplish then that you can’t accomplish now?

Next Recommended Article: Two Games to Change Your Money Mindset

Ready to Begin Meeting With a Debt Coach in California, New York, Texas, or anywhere else in the United States?

Are mounting debts causing stress and uncertainty in your life? Take control of your financial future and overcome financial trauma! Find relief and guidance with a skilled debt coach at Pacific Stoa, let’s pave the way to a debt-free tomorrow together. Follow these three simple steps to get started:

1. Reach out to me to schedule an appointment to see if Financial Coaching is right for you

2. Begin meeting with me, Hanna Morrell, a skilled debt coach

3. Take control of your finances and pay off your debts!

Other Services Offered at Pacific Stoa

At Pacific Stoa, I want to make sure you have everything you need when it comes to managing your finances. So in addition to helping individuals take control of their finances and pay off their debts in Financial Coaching for Individuals, I also provide Financial Coaching for CouplesFinancial Coaching for Divorce and Separation, and Financial Coaching for Families. I also offer Financial Consulting for Nonprofits and Businesses to help create a customized strategy built specifically for you, your organization, and those you serve. Check out my FAQ to learn more about Financial Coaching and my Blog!