Last week on Twitter I mentioned that one of the toughest things about a debt snowball plan is sustaining momentum as you move through each of the debts. Early on, victories come quickly with smaller debts geting paid off on nearly a monthly basis, or so it was in our case. But later on you find yourself staring up at those last two or three piles of debt and realizing it is going to take months, or even years, to follow through on your financial goals. That’s when it is time to schedule some rewards for your hard work.

With the summer half over, and no vacation plans on the horizon, we have decided to schedule a long weekend in the near future for a short trip somewhere close. It’s a reward to ourselves for hitting a major milestone in our debt repayment plan – we are now completely free of car debt for the first time in our 11-year marriage!

Ideas for Setting Up a Getting Out of Debt Rewards Plan

• Share the rewards with your friends and family. Get everyone fired up about getting out of debt. For those with kids it often helps to let them know about the goals, even if you substitute dates for dollar amounts (i.e. we would like to pay off our car by September, rather than we need to pay off $9,000 in car debt). Besides getting them excited about getting out of debt, it also helps soften the blow each time you say “no” to their request for a new toy. They know the whole family is on a plan to get to debt freedom!

• The reward should be in proportion to the level of sacrifice to achieve the related milestone. In other words, don’t schedule a cruise to celebrate paying off a $300 medical bill. But do schedule one (if that interests you) to celebrate paying off your $40,000 in student loans!

• Put together a sinking fund for your “Rewards Account.” The last thing you want to do is celebrate paying off debt by charging a trip for the family to Six Flags. Instead, create a sinking fund in a dedicated checking or online savings account, and move some money out of each paycheck there to fund a “Rewards Account.” When you hit your debt milestone, withdraw your cash and enjoy!

• After celebrating, get right back to work paying off remaining debts. Now is not the time to grow complacent. As soon as your vacation is over, or you’ve spent some time enjoying your new purchase, get right back into your debt snowball plan and work towards that next milestone.

Getting out of debt is as much about being disciplined emotionally as financially. If you become burned out with your debt repayment plan long before you pay off 50% of your debt, chances are you will never make it to debt freedom. Planning a few rewards along the way will help keep you and your family on track.

In case you are wondering, our next milestone to celebrate is when we’ve paid off all but our final credit card. The reward? A new living room sofa. When we are totally debt free? We’re finally going to Disney World!

Since I was a teenager, I’ve drawn a lot of inspiration from sports. For me, the life-lessons learned through sports are so relevant to many of the same struggles we face in real life. Little did I know that something I picked up from following college football would help me stay motivated on my plan to become debt free.

In 2006 the Rutgers football team made a big splash in the world of college football. They even knocked off Lousville that year, who at the time was ranked as the #3 football team in the country. It was a huge win for the Rutgers program, and their new coach, who began to draw national media attention.

I noticed during the game that players were making a “chopping” motion after big plays, and a number of coaches joined in. I didn’t understand the celebration, because it looked to me like they were simulating the referee’s call for a personal foul. After searching around the web, I discovered they were “chopping wood,” which was the visual representation of a mantra the coach had brought to Rutgers.

An AP story from that year describes the motivation behind the phrase “keep chopping wood.” Apparently, the idea was developed by a sport psychologist, and adopted by a number of coaches as a battle cry for teams trying to rally from behind. I like how Rutgers coach Greg Schiano summed it up:

“Right now we’re in a bad spot, we’re in the middle of the forest, it’s all dark, we can’t see. Get an ax and just start chopping away.”

That’s the approach we have taken to debt repayment. Some trees (debts) were taller than others; some bigger around. It didn’t matter, we just kept chopping, and eventually those trees began to fall. To most people, it might seem like it would be easier to borrow a chainsaw-it’s more efficient than an old ax. But swinging that ax hurts, and that pain is an important part of the process because it is a constant reminder of why you’ll never venture out into the forest again.

Some months you’ll chop more wood than others. Illnesses, emergencies, and other unforeseen events will inevitably slow you down. Just keep chopping! One word of caution. After a few months of swinging your ax you’ll start to create a little space. Don’t get comfortable. Complacency is the enemy of progress. If you decide to put down the ax and take a little nap, you might wake up to find things overgrown again. Now you’re tired, sore, and once again surrounded by debt.

How do you psyche yourself up to face similar challenges?

Fans of the Dave Ramsey Show probably recognized that line in the title. Dave’s got a few variations – pay off the Tahoe, amputate the Tahoe, etc. Over the last few weeks I’ve been hinting at how close we were to paying off my wife’s Tahoe (our family vehicle). My old van was paid off long ago, but our family ride has been dragging a debt payment behind it for the last four years. I’ve been personally dragging around car debt even longer, and I can’t tell you how good it felt to make the last payment on Friday.

It might not seem like a big deal to some, but for me it represents finally freeing ourselves of the bondage of car debt. It was a journey that’s taken over a decade. I’ve gone through the sordid history of my ill-conceived car purchases in the past in great detail, so I’ll simply summarize them here.

• My first car was a 1985 Buick Century, handed down from my grandparents. It was a nice car, but it wasn’t a “cool” car, so I didn’t fully appreciate it as a teenager. However, it didn’t have a payment, and the insurance was relatively cheap, which is a big bonus for teenagers. I drove that Buick until the wheels fell off, almost quite literally. It developed serious electrical problems, and one night while parked in my dorm room parking lot in college it caught fire under the hood. We tried to replace some of the wiring, but it was cooked…literally.

• At 21 years-old, and newly married, I leased a brand new Isuzu Rodeo. It was a stupid decision considering the annual salary I was earning at the time was only a fraction more than the lease amount!

• At 26 years-old I was still driving the Rodeo, having paid off the lease by taking out another loan, extending the payments another three years.

• At 27 years-old our family was growing, so we bought a used (the only thing smart about it) 2001 Chevy Tahoe. Since I still owed money on the Rodeo, the bank was nice enough to roll that into the loan for the Tahoe since the sellers were letting it go for far less than Kelly Blue Book.

• After a number of months of trying to sell the Rodeo via private sale, I made the mistake of stopping by a car lot and started stalking a beautiful, gently used Chevy Silverado pickup truck. The salesman worked his magic and talked me into trading in the Rodeo and driving off with the Silverado (and even more car debt).

• It only took a few months of making both payments for me to realize something had to give, and that something had to be my Silverado truck – as much as I loved that truck. I put a “For Sale” sign in the window, and advertised it in the local credit union bulletin. In two weeks she was being backed out of my driveway by the new owner for $1,000 less than what I paid.  I wrote that $1,000 off as stupid tax.

We diligently kept up payments on the Tahoe, but at some point I just got downright tired of having a car payment. I told my wife in April that I wanted to move the Tahoe up in our debt snowball, following what I now know to be the Debt Tsunami style of debt snowballing. It didn’t make sense mathematically, as it was an incredibly low interest rate, and it wasn’t our lowest balance. It was personal. I had decided we had been dragging around a car payment long enough, and since we were within a few thousand dollars of paying it off, I wanted to make a final push and be done with it.

Last Friday we did just that, making a final payoff of about $700, which I scrounged up from freelance work, and from Friday’s paycheck from my full-time gig. The budget will be a tighter for the next two weeks because it was a stretch to pay it off, but I couldn’t wait another two weeks. The instant I pressed “submit” for the final loan payment online I felt the load of eleven years of car debt being lifted.

Now I look forward to receiving the title from our credit union, and for the first time in my adult life, being car debt free. Dave Ramsey’s right; they do drive better when they aren’t towing a car payment!

Stacy writes in with the following questions regarding paying off debt:

Q: If you have a canceled credit card and its balance is the lowest should you work on paying that one off first or one that isn’t canceled? Also, would you work on paying over the credit limit cards or paying off payday loans first?  We have ideas but just aren’t sure where to start and attempt to tackle the debt.

A: Stacy, there are about as many ways of paying off debt as their blogs dedicated to the subject!  First of all, I commend you for taking control of your financial situation and eliminating the temptation to go even deeper into debt. The usual advice is to wait until your card is paid off to close it, because it can be detrimental to your FICO score to reduce the amount of credit available. Having said that, I’ve violated this advice myself and closed an account before paying if off because of the way the credit card company treated me.

From your question, it sounds like you have a variety of debts including a canceled credit card, an over-the-limit credit card or two, and some payday loans. The standard advice is to pay off the debts in the order of the interest rate – paying off those with the highest rates first. In my own experience, I have found that method of snowballing debt to be tougher to work through because of the lack of emotional reward returned.

I recently linked to an article over at Man vs. Debt about the Debt Tsunami method of paying off debt.  According to this debt snowball style you line up the debts giving priority to the one that is most emotionally charged. or gives you the biggest emotional boost when paid off. In your example, that might be the payday loans, or a personal loan that you’d like to clear from your list of debts. For me, it was my car loan, because since marrying my wife eleven years ago I’ve never known freedom from a car payment.

The other thing to consider is the fees associated with the over limit credit cards. Perhaps it makes sense to prioritize those first until the point that they are all safely under the credit limit and current. Then you can regroup and reorder your debts in the priority that works best for your situation.

Finally, there is no easy way out of debt. For me, the climb out of debt has taken more dedication, more perseverance, and more sacrifice than anything in my life up to this point. However, the rewards at the end are just as sweet. I suspect because you took the time ask for help with lining up your debts that you also have a gameplan for paying them off, and I have little doubt that you can do it. Let us hear from you again when you are debt free!

After being in debt for some time you find yourself struggling to remember what it feels like to not owe anyone. Unless you have been deep in debt, it is hard to describe the feeling to others. At times it feels like a tractor is parked on your chest, and other times it feels like two tractors are parked on your chest.

The best way I can sum it up is to say that being in debt sucks. Sorry, I know that’s a bit crude, but when it comes to debt all rules of verbal civility must be tossed. Without further apologies, here’s my list of reasons why being in debt sucks.

1. Debt limits your opportunities. How would you like to pick up and move across the country, or maybe just closer to relatives, or to the beach, or to the mountains?  Perhaps you would like to make a career change, go back to school, or take that international assignment for a couple years. Forget about it. You are in debt.

2. Debt forces you to put up with more crap. Debt forces us to put up with bad jobs, poor living conditions, broken down cars, and cubicle creeps with headsets, also know as debt collectors.

3. Debt is the first thing you think about each morning. Seriously, you know you are in trouble  when you hit the alarm clock at 5:30 in the morning and think, “Hey, that’s the same amount as my car payment – $530. And I have no idea how I’m going to pay it this month!”

4. Debt is the last thing you think about each night. Money problems is a leading cause of insomnia. Instead of drifting off to sleep counting sheep you lie there counting the months until you will be debt free.  You obsess over it.  You worry over it. And the reality that you can do little to get rid of it right away leaves a feeling of helplessness that is truly depressing.

5. Debt eats away at future earnings. For every dollar you pay in interest on debt it is a dollar that could have been spent on something else, and a dollar taken away from your earnings.  It’s like a little debt monster snatching $100 from each paycheck and depositing it in their bank, laughing all the way!

6. Debt makes you desperate. There is a reason people applying for positions with financial authority are scrutinized more carefully. Of those who commit financial crimes, it is not unusual to find out they were deep in debt. It has a way of challenging your morals for the promise of freedom.

7. Debt affects your entire family. Kids may not fully understand the financial ramifications of debt, but they recognize Mom and Dad sure fight about that “d” word a lot.  They don’t know what debt is, but from listening to you they think they’ll always be in it, and being in it must be bad.

8. Debt is a lousy employer. When you are in debt, and over half of your income is going towards repaying that debt, you might as well consider yourself working for the debt. And debt is a lousy employer!

9. Debt plays by its own set of rules. Don’t believe me? Try carrying a large balance on a credit card. One month your statement reflects an APR of 6%, the next 29%. What did you do to deserve it? You just appeared risky to their scoring model.

10. Debt makes even the sweetest life events taste sour. Getting married, buying a house, and having a baby should all represent some of the highlights of your life. But if you are deep in debt, these event only provide temporary relief. Until the bills arrive, that is.

If you find yourself deep in debt, you’ve probably experienced some or all of these feelings.  I hope you are working to get out of debt. If you are not in debt, or have never been in debt, consider this ten reasons to never go into debt. Trust me; it sucks.