Wow..Debt Really is a Motivator

by Sandy L on May 17, 2011

Have you ever noticed at a gym that there are three types of people?   There’s the person who is self motivated and can push themselves on their own. Second, there’s the person that needs constant positive reinforcement, ie “You’re doing a great job, awesome, keep it up!” Third, there’s the person who is extremely motivated by negative reinforcement, ie “You call that boxing? You’re hitting that bag like a girl.”  Oh, and I guess there’s that 4th person too. It’s that annoying meat head who has to grunt and scream when they are lifting weights. (He’s my least favorite, especially when you’re at a tiny hotel gym and it’s just the two of you in there). Awkward!

Debt: the Ultimate Motivator

I’m convinced that one of the many reasons that so many people are in debt is not only because of the instant gratification, but  also the instantaneous life purpose that “Pay off debt” brings.  It is the simplest thing in the world to work for the sake of paying the bills and paying down debt.

For as long as I can remember, I’ve always had some kind of loan that I was working on repaying.  I never really had consumer debt, but I did have student loans, car loans, multiple mortgages. I had plenty of mortgage advice from friends who bought before us and/or mortgage brokers, so securing a loan at a good rate was always pretty simple.  Paying debt was completely brainless and easy.  I payed my bills and put a little away for retirement and whatever was leftover went to debt.   Aside from making a budget, it requires little to no planning and really no strategy whatsoever. I don’t have to worry about asset allocation or long term plans. All I had to do was  just write a check once a month and everything else was figured out for me.

I’ll also tell you a nerdy fact about myself.  I loved opening that loan bill the following month and looking at that balance go down. I specifically looked forward to little milestones on my mortgage like the point where I started paying more principal than interest every month, or the 1/2 way point to payoff, and then had little goals in increments of $10,000.   Whenever I’d hit one of these mini-goals, I’d be like “We’re down to $80,000 on mortgage 1, woo hoo” and my husband would be like “so?”  He just didn’t get why I would get all jazzed up about that stuff.  We’re always going to have monthly expenses, so what’s the big deal?

Then I realized I was one of those people who was motivated by negative reinforcement.  In a nutshell, I suck because I’m in debt and I want to suck less.

Savings: Not as easy or fun

Back in 2008 when I was about to pop out my second child, I was in the middle of an expensive kitchen remodel, I was in the hospital, my kitchen was totally gutted, and so were 2 rooms in my mom’s house and my company had massive layoffs. I was still in the hospital when it happened.   My husband and I work at the same company, so there was a chance that both of us would be impacted. I cursed myself for being so spendy and focusing too much on fixing up our houses vs paying them off.  Although we bought our home based on one income, when we bought my mom’s house and then had children, suddenly our expenses more than tripled and that one income safety net was suddenly gone.  We needed those 2 incomes.  Luckily for us, we were not impacted by the layoffs but it was a real wake up call.  After the kitchen was done, I stopped all spending on home improvements  and focused on rebuilding our emergency fund and paying down our 2 mortgages (Babci’s and ours).

After 15 years of working full time and scrimping and saving, for the first time in my life, I actually have money leftover at the end of the month. Unlike before, we don’t have 3 money pits to put the excess into. (for a while we also had my mom’s apartments to take care of and those were a huge cash drain as well. Thank god we sold that headache of a 3-Decker).

Then I realized saving is hard. If you invest in the market, you have to watch things go up and down all the time and you really don’t know day to day what your net worth is and how much could evaporate overnight from a market correction.  If you go the more conservative route, you’re always wondering about about losing money because it’s not growing as fast as the rate of inflation.  The whole time, one way or another you obsess about losing the money you set aside.

I like Money Reason’s Dividend Investing Strategy because his goal is about generating passive income through stock dividends which sort of takes out the variability in the stock market ups and downs.  He ignores the value of the stock itself and just focuses on the return.  The stock is almost like a sunk cost to get a consistent revenue stream in return.

I’m really having a tough time measuring progress and setting goals with savings.  I really don’t feel like I can pat myself on the back at the end of a month when the stock market surges and I made an extra 5 or 10% in a month.  Similarly, I don’t beat myself up if I lose that in a month either. It doesn’t feel like real money to me, and in fact it’s not real until you sell and have cash in hand.   Babci never invested in anything but  CD’s.  She felt like anything else was like gambling.  That was all fine and good in the 80s when CD’s were making 11% but nowadays it’s not such a black and white decision.

What do you think, am I just warped or is there something to my theory that debt is a handy motivator to progress in your career and work hard?    If you have savings, what motivates you to save?  How do you measure milestones? What do you do for giant goals like retirement or college funds? Do you make annual milestones for yourself? Especially with retirement, it’s always hard to figure out how much is enough.   I think I need to explore this topic further.  Readers, I’d love to hear your perspective. I’m treading on uncharted territory here and I’d love some help.

{ 29 comments… read them below or add one }

Niki May 18, 2011 at 7:09 AM

I think your theory holds water. I kind of had that same thing with paying off loans and watching the number go down.
With tackling debt there is one ultimate goal to focus on, but when saving, you spread all that focus around. Saving for retirement, emergency savings, education or even remodeling. So not only are you getting pulled in all directions, there is also no magic number (like zero) because the sky is the limit. I think it’s easy to lose the enthusiasm.


Sandy L May 19, 2011 at 2:36 AM

Niki – I think you hit the nail on the head and summarized why savings is harder (you’re spread way thinner and the goal is more nebulous). I really couldn’t figure out the reason why I feel less passionate about those goals, but I think that’s it.


Nicole May 18, 2011 at 8:10 AM

Here’s Sheldon comics on people at the gym:

I’m definitely motivated by fear of being poor. But I’m also motivated by an intense hatred of wasting money… some things cause me to dig my heels in and high interest rates is one of them. And, more recently, I’ve been motivated by the realization that money can not only buy security but it can also buy time. But you’re right, savings is less directed… it’s harder to think about why. Dave Ramsey is good because he tells you why and what your goals should be, so you don’t have to wonder what it’s all for or to get your own motivation. Some people have a magic number for the same reason.

On the other hand, if a person has found “enough,” then saving money can come as a by-product. But very few people look at spending that way. For one thing, you have to be pretty high income for your enough to be significantly less than your income!


Sandy L May 19, 2011 at 2:45 AM

Nicole – funny cartoon and true. I’m also motivated by not wanting to be poor, lost opportunities and future crisis. I always think that someday I may need to take time off to care for family and now is the time to build that safety net, especially since they are my peak earning years. “Enough” is hard to define. Although I love my house, it would be nice to be in a better school district, live with Babci and have a little bit of land to play on. That would cost a lot more than where we live now, but it would also simplify things too (only 1 lawn to mow, only one house to maintain, 1 set of utilities to pay, etc)


Jacq May 18, 2011 at 9:05 AM

I didn’t set any annual milestones myself – other than to max out my retirement accounts. I just lived on one paycheque and banked the other one plus any extra money. The “extra” money was pretty significant though and the regular paycheques were pretty decent too.

I didn’t really ever see it as *my* money to actually *use* – it was designated for *future me at 50*. That’s why it was a bit of surprise when I tracked the investments starting around 18 months or so ago and found I had hit the cross-over point – because I hadn’t really paid attention to it much. I don’t intend on using it though for quite some time so it can just sit there and grow.

This year has been weird since I had kind of planned to not work anymore this year after I made enough for the year in the first few months. But then it’s stretched on, so I’ve just racked it back to 12 hours a week until the end of June when we’re going to be off traveling. No need to be greedy. 🙂 I kind of have that earmarked for someone else to put new lawns in this fall (something I was going to do myself – except I don’t like doing that stuff.)


Sandy L May 19, 2011 at 2:49 AM

Jacq – I love your story. I guess that’s what I need to do next, is decide what is cross over point and what order I should save things in. I’ve done nothing for the kid’s 529s aside from opening accounts and throwing gift money from relatives in there.


MutantSuperModel May 18, 2011 at 10:53 AM

Hmm I don’t know. I never really thought of debt as a motivator. Expenses yes. My top three expenses are Rent, Daycare, and the Auto Loan. Only one is debt-related. My motivator is surviving and enjoying. Roof over the head, lights on, water flowing, car driving, children cared for, food in stomachs, etc. I think a certain lifestyle is my motivator. Debt is an obstacle to my idea lifestyle but it will be completely eradicated in a couple of years. Because the money I save is for emergency funds and big-ticket things I have to pay for (education for kids mostly), the motivation for saving is definitely fear.
I think debt can work as some type of motivator if only for a little while or in tangent with something else. Like I said, for me it’s an idea lifestyle. So yes while chipping away at debt provides satisfaction it’s not because the numbers are going down but because I’m getting closer to my ideal life. Does that make sense?

I always like philosophical discussions. 🙂


Sandy L May 19, 2011 at 2:54 AM

Mutant – For me, the huge debt load we had was scary because our fixed monthly expenses were very high. My ideal lifestyle would be being able to live off minimum wage if I had to. For example, my house is near a lake. My taxes are $3K/year, but those houses on that lake cost $15-$20K/year in taxes alone. As nice as a house on a lake may be, even if I had the money to pay for one of those suckers in cash (which I don’t), I’d never want to be stuck with that type of tax burden as it’s a fixed expense that doesn’t ever usually go down, but it does go up over time.


Jacq May 18, 2011 at 10:58 AM

Oh – meant to say too that one thing I find true (for me) and very helpful is the inner rebel that comes up if anyone says “you can’t do that” or “that is tooooo haaaard”. You just watch me then. Which is the person that thrives on negative reinforcement – but they only have to say it once, so I’m also solo-motivated. I find the encouraging people a little disconcerting and I never know what to say – err… thanks? I just never grew up hearing that stuff, but I try to do it with my own kids (praise effort, not results so much) but they’re both pretty self-motivating.

I’m not a super mortgage payer like you are Sandy. I can see the benefits to it, but investing is just more appealing to me for some reason. There’s definitely a major fascination with “the next level” of savings too – from $10k increments, then you start pushing yourself to hit the next $50k increments – and some people push for the millions at some stage I guess. Fortunately I’ll never have to do that. 😉

But I was reading about this one guy on the ER-org forums and he’s got over $1MM put away and was really celebrating it – that’s the addiction to achieving the increments for NO purpose other than to hit a number that is meaningless – single + no kids, almost 50 yo, paid off house, only spends like $20k/year. I just thought it was kind of sad. I do not want to end up being a money hoarder, that mindset is totally repellent. I’d rather help others while I’m alive.

Hmm. Guess I should write on my own blog now instead of distracting myself with others – wanted to write about my love child with Jacob F.


Laura May 18, 2011 at 12:11 PM

‘about my love child with Jacob F’
Lol, what a frugal little love child he or she would be..probably be retired at 25!!! 😉


Sandy L May 19, 2011 at 2:57 AM

Um, who’s Jacob F? Is he the early retirement extreme guy? And yes, you need to write an article or two. As much as I love your comments, I miss your posts.

I’m also horrible at taking compliments. I usually have to just clam up and remember to say thank you.


Kristi May 18, 2011 at 12:05 PM

Thank you for your blog, I really enjoy it.

I recognize the feeling you are describing, at this point my mortgage is paid off and I am saving 15% of my paycheck for emergency/kids college and 15% for retirement. It seems like after I take the 30% off the top for savings, every penny of the rest goes to pay month-to-month living expenses, so even though I’m saving a lot, I feel “poor.” Still working on motivating myself to keep saving at this rate for the long haul!


Sandy L May 19, 2011 at 2:59 AM

Kristi – I like hiding money from myself as well. If it’s in my checking account, forget it. It will eventually get spent. It’s amazing how having extra money will eventually get widdled down to nothing in a few months. My husband often makes fun of my anemic checking account.


retirebyforty May 18, 2011 at 12:17 PM

Great post! You’re very analytic about your personality type. I work out on my own in the gym and the motivation is health and energy. I don’t really need positive or negative motivation.
I think my investing strategy is also similar. We have mortgage debts, but I’m not really motivated to pay them off early. Cash flow is much more important to me. I check my net worth pretty often and it’s nice to see the increase, but even if the market is down, I don’t let it stop me from contributing.
My goal now is to have positive cash flow without counting my paycheck. It’s very difficult because Mrs. RB40 makes less money than I do….


Sandy L May 19, 2011 at 3:02 AM

Rb40 – I actually like contributing when the market is down. With your rentals, it’s easier to track cash flow. Savings often gets reinvested so it’s a little harder to separate out earnings unless you opt out of reinvesting dividends.


Invest It Wisely May 18, 2011 at 12:19 PM

I personally don’t really worry too much about mortgage debt so long as the costs of servicing it are reasonable. I definitely try to avoid other forms of debt like CC!

My primary motivator is income independence.


Sandy L May 19, 2011 at 3:03 AM

Invest it- Yeah, that’s my husband’s position too.


Laura @ move to portugal May 18, 2011 at 12:25 PM

After being really motivated to pay off consumer debt I assumed that I would retain the same impetus towards saving for financial freedom..but it didn’t happen. I am motivated to pay off the mortgage and save for the future, and still get excited about reaching milestones, but it’s nothing like the gazelle like intensity of paying off my cc’s.

Great post Sandy!


Sandy L May 19, 2011 at 3:08 AM

Laura – wow..I so know what you mean. After 2008, I was attacking from all angles. Budgeting more closely, selling things on craigslist, having yard sales, scaling back vacations… I mean we did it all. It did feel like gazelle like intensity and had a massive impact. Since historically my company/sector goes through layoffs every 2-3 years, I felt like I was fighting the clock and time was not only money, but it was also limited. Now, I have seemed to lose some of the passion. Maybe I just need a break.


Philly area May 18, 2011 at 2:43 PM

Debt is a huge motivator for me. I also enjoy watching the mortgage go down each month and I have milestones I’ll reach for. However, I get a similar thrill from watching a savings account go up.

It used to be we had one big savings account/emergency fund. Now we’ve got lots of smaller ones. An emergency fund, a car replacement fund and a vacation fund, for instance. The emergency and vacation funds are done, but the car replacement fund has a ways to go. It’s a huge motivator.


Sandy L May 19, 2011 at 3:11 AM

Philly area – hmmm…I’m not sure if having multiple accounts would actually help me or demotivate me further because I’m spreading myself thinner. I suppose if I did one at a time, they would make good milestones. I have an ING account but have done nothing more than open it thus far.


Suba May 18, 2011 at 4:17 PM

The only debt we had was our car loan and it was a great watching it go down every month. It was more than a motivator though, as an immigrant, debt is abnormal (for lack of a better word) where I come from. So there was a constant urge to just-get-rid-of-it so we can be free.

Now I am channeling that “thrill” to our savings. Having goals makes it much more easier and gives the same excitement – seeing us hitting that quarterly/annual goals. Great analysis!


Sandy L May 19, 2011 at 3:14 AM

Suba – yes, true. My mom never had any debt. It is such a foreign and almost “evil” concept. I need new goals..that’s all there is to it. For savings, all I’ve ever done was just auto-withdraw a set percentage out of my pay and not really think about it. I think I need to be a little more strategic about that stuff.


Money Reasons May 19, 2011 at 12:33 PM

Sorry for being so late to the party on this article…

I was raised to hate debt, so when I had it, I tried to eradicate it as quickly as possible. But paying off debt was so easy and definite. I had a spreadsheet, the decreases in the amount I owed were real and there was no going back! Once that month’s worth of debt was paid off it was gone, easy peas!

At certain financial milestones, we (sometimes just my wife and I, and other times the entire family) would go out and celebrate by having special dinner at a fancy restaurant, just as a kind of icing on the cake…

I’ve played in the stock market since I was a kid, but not with much money. Now it’s much harder since I’m putting a lot more money in. My 401k would run itself, so I don’t have to do much with it, I just let dollar cost averaging do it’s magic. But in my regular brokerage account, it’s now a windfall at certain intervals. This is very different for me. I’ll probably just find a nice simple and safe ETF or mutual fund to start channelling most of my money into…

So to conclude, I know exactly what you mean and how you feel. While I didn’t get debt as a motivating factor, in a strange way I miss how simpistic the goal of just paying it off was… Shoot, I’m even thinking of dabbling in real estate to make money, but also to have a simple repayment structure again. Funny huh 🙂


Sandy L May 20, 2011 at 5:20 AM

Thanks Money Reasons – I was very curious about your response. I was also thinking of some kind of property too especially since we want to combine households eventually with babci. I just have to keep telling myself that every month I put that off moving is one less month of $1000 interest payments.

I remember when I paid off my student loans, I bought myself a surround sound system as a reward. At that time (briefly) I was debt free. I don’t remember celebrating any of the other milestones because there was just another debt right behind it.


Financial Success for Young Adults May 23, 2011 at 2:56 PM

I’d have to say that debt is a motivator for me also. I’ve worked out a budget for the next three years which is right when I will have all of my debt paid off (besides student loans) and I really don’t know what I’m going to do with all that extra money. It’s almost no fun anymore. I guess I better set up an automatic withdrawal or up my 401k contributions.


FinanceProfessor May 27, 2011 at 11:00 AM

There is a lot of truth to this theory. I find myself looking at the debt I have accumulated, as a challenge to work towards financially. It all fits together like a jigsaw puzzle and if you piece it together correctly, you can pay off any debt with a moderate income. Thank you for the reminder that debt really doesn’t close as many doors as one might think.


Ross @ Great Credit June 14, 2011 at 4:08 PM

i would agree with you. Personally i need help to get motivated, debt and bills really help me get to work. But i also find that if things are going really bad financially, i get a little overwhelmed and get too preoccupied with it.


mirindaM August 15, 2011 at 2:41 AM

It is indeed! Did you guys also know that most Americans could not manage to satisfy a sudden expense of $1,000 if it were to come up.

Article Source: More than half of Americans lack savings for emergency expenses

I think that’s what most Americans are lacking. The value of being practical and thrifty. Now what will happen to them in times of economic turmoil if they can’t even manage emergency expenditures? Now that’s something to ponder on indeed.


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