3 Rules That Kept Shame Out of My Spending While Paying Down Debt

A photo to accompany a story about financial independence Getty Images; Hunter Newton/Next Advisor
We want to help you make more informed decisions. Some links on this page — clearly marked — may take you to a partner website and may result in us earning a referral commission. For more information, see How We Make Money.

When people hear that I paid off $300,000 of debt in three years and now have a debt-free lifestyle, the most common misperception is that I must not spend a lot of money. They assume I live by the “rice and beans” philosophy, the one that shames you for eating out at restaurants and splurging on yourself.

In actuality, I love to spend money—not hoard it. I thoroughly enjoy buying name brand clothing, eating out at least twice a week, and traveling frequently. I am known to spend a pretty penny on K-Pop merchandise and live concerts. 

And while I was paying down $72,000 of student loans, I learned that if I completely deprived myself of everything I enjoyed spending my money on, staying on my debt-free journey was not going to last very long. Finding the balance between living your best life and paying down soul-sucking debt like student loans is personal, but these three spending rules helped avoid the spending shame spirals and encouraged me to pay down debt faster.

This is the second column of a 5-part series from Bernadette Joy. In “Mess to Million,” she shows that you don’t have to be perfect to get rich. Follow @nextadvisor on Instagram for updates and live Q&As with Bernadette.

Rule #1: Ask yourself, “This or that?”

“This or that” is the rule that I credit most for helping me pay down $72,000 of student loans in less than a year after graduation. In order to implement this or that, you must define what “this” is, and what “that” is. “This” refers to the thing that you really want to buy now.

“That” refers to the larger money goal you are working towards. “That” could be paying down your debt like student loans, credit cards, a car note, or personal loans. If you’re not focused on paying down debt, “that” could be working towards your investing goals or purchasing your next home. 

When you find yourself in a spending decision, you must ask yourself: do you want to buy this item now, or do you want that bigger goal more? This or that?

It sounds simple, but there are two tricks that have to happen for this rule to help you pay down debt. The first trick is that you actually have to put the amount you would have spent towards your debt instead. The second trick is that “that” needs to be focused, tangible and awesome to you. Simply making “that” mean paying down your student loans isn’t very awe-inspiring. 

As an example, I love buying sneakers and shoes of all kinds, and it’s tough for me to pass up a good sale. (Trust me, I can always find a good sale.) However, while I was paying down my student loans, if I found myself wandering into the mall and finding a pair I would like to buy, I would ask myself, “Do I want this pair of shoes, or do I want to be debt-free and quit my job in the next two years?” Most of the time, I would choose the vision of leaving my day job over the short-term thrill of a new pair of shoes. 

And so I made an actual spending choice. I would pull out my phone and make a payment to my student loans for the exact amount of what the shoes would cost. If I could show you my transaction history from my now-gone student loan account, you would see many small payoff amounts, each of them correlating to a time I chose between this or that. By putting that exact dollar amount of what I would have bought, I not only mentally saved the money, but I took action towards getting my debt down.

Rule #2: The 5% cash back challenge

Let’s be honest. Paying down debt isn’t the most thrilling, so I wanted to figure out a way to make it feel more rewarding along the way. I remembered from my days in financial services that people love using their credit cards because of the rewards and points programs they offer. So I decided to make my own reward program for paying down debt. 

If you have a hefty amount of debt, try breaking it down into smaller increments and then promise to pay yourself back every time you hit that milestone. For example, let’s say you have $10,000 of debt. For every $1,000 of debt you pay off, you can give yourself 5% back or $50 to treat yourself to something nice for hitting your goal! 

While many debt-free experts say you must cut out everything that’s not necessary, I don’t believe that paying off debt means you can’t treat yourself. I don’t drink a lot of coffee, but there was no way I was going to cut out bubble tea from my life while paying down student loans! Implementing the 5% cash back rule made me feel less guilty about spending money towards unnecessary, but enjoyable purchases while still staying on track. I used this cash back reward to myself not only for bubble tea, but for clothes, gifts for friends, or a dessert treat. And sometimes, I would stack my cash back to save up for larger purchases while paying down debt, like tickets to see a show. It gave me something to look forward to, and helped me to acknowledge my progress along the way, instead of glossing over what I achieved so far.

Rule #3: Ask myself, “Is this FIRE?”

Now while paying down debt is hard, I am going to make the bold statement that staying out of debt is just as hard, if not harder. 

After paying off my student loans and mortgages, I found myself feeling guilty for spending on larger purchases, because I was used to going without them while paying down my debt. And then for a period during the pandemic, I found myself slipping into old spending habits and justifying purchases that I didn’t used to spend as much on—because, hey, I’m debt-free now, right? And this world is feeling crazy! 

I’m finding a new rule that works well for me now to keep the balance. It’s to ask myself, “Is this FIRE?”

Traditionally the acronym of F.I.R.E. refers to “Financial Independence, Retire Early.” But I’ve personally tweaked the acronym to something more tangible in the present for me: “Financial Independence, Relax Everyday.” What does this small change in words do for me? It forces me to ask myself if a potential purchase will either help me become more financially independent in the future OR feel more relaxed today.

On one hand, asking myself “Is this FIRE?” has led me to focus more on investments that will appreciate in the long run: buying our next home and putting more into retirement accounts that clearly help me get towards financial freedom faster. On the other hand, it’s also given me permission to buy things that might not necessarily fit into financial independence, but certainly help me feel revived in the present. 

Asking myself if this is FIRE also removed my guilt-buying things that my first-generation Asian parents would call out as a “waste of money.” It’s been little by little, but now I shamelessly buy pricier organic food, splurge on massages, and have zero qualms on paying for therapy and coaching. These purchases reduce my anxiety and put me closer towards the healthiness I need to enjoy the financial independence I plan to have in the future.

Rather than rigidity, I teach my students that an 80% success rate on all my spending rules is great.

In my role as a financial educator teaching thousands of people how to pursue debt freedom, I found that where people most falter on sticking to their money plans is the idea that this must be all or nothing. Either you stick to the rule 100% of the time or not at all. I’ve always been a fan of the Pareto Principle, or the 80-20 rule that says 80% of your success comes from 20% of causes. It’s often applied in personal finance to say you should focus on the top 20% of factors that produce the best results.

But as a recovering perfectionist, I’ve used this principle in reverse to say that I as a human being am allowed to be a human being at least 20% of the time. That means for me, that as long as I follow these rules 80% of the time, it allows for the rules to be broken from time to time without completely derailing my financial progress. 

So yes, sometimes the shoes win and end up coming home with me. I totally spent more than 5% of my milestone goal to buy once in a lifetime tickets for BTS live in concert. And did that Super Mario themed denim jacket I love to wear get me towards financial independence or relax every day? Of course not, but allowing myself to not have to calculate every purchase at least 20% of the time and showing my students you can still pay down debt and make your first $1M in net worth is what makes personal finance, and life, so much more fun.

In my next article of Mess to Million, I’ll share some of my personal tips on how to help your parents financially as a first-generation American.