How to defeat debt and still have fun

Digging your way out of debt requires shifts in mindset, self-discipline and spending. But it does not mean you have to give up everything that is fun.

With a bit of creativity, you still can enjoy treats, gifts, vacations and recreation as you chip away at credit card debt or student loans.

Most people do not succeed if they slash virtually all discretionary spending in hopes of paying off debt fast, says financial therapist and psychologist Maggie Baker, author of "Crazy About Money: How Emotions Confuse Our Money Choices and What To Do About It."

How to defeat debt and still have fun

"Slow and steady does the job. If somebody tries to do it too quickly, it's too depriving," she says.

The struggle to get out of debt may be difficult, but it teaches important lessons. "Making changes in your attitude, making positive changes in behavior, is one of the most stabilizing and empowering things you can do for yourself," says Baker, who practices in Wynnewood, Pennsylvania.

Finding cost-conscious compromises
Johnny and Joanna Galbraith paid down $20,000 in student loans in fewer than two years as newlyweds. The Galbraiths say they made sacrifices while maintaining a healthy social and family life.

As a result, they have been debt-free for three years. The young couple blog about their financial life at Our Freaking Budget.

"We made it a point to find small, cheap ways to enjoy life and give us much needed motivation to stay on track," Johnny Galbraith says. "With everything, we found compromises."

For example, when friends invited the Galbraiths out to eat, the couple would pass, but then invite the friends over to visit. Or, they would meet with them after for dessert.

Frame of mind and good planning have played a vital role in keeping the Galbraiths on track financially. "We made sure that any vacations we took didn't exceed the money we 'earned' in [paid time off] time for that trip," he says. "We still celebrated every gift-giving holiday, but we budgeted our gifting at the beginning of the year to avoid emotional spending as the holidays neared." 

How the occasional indulgence helps
The Galbraiths found that small indulgences actually helped them stay focused on their goals. "It was important for us to feel united in getting out of debt, but still feel the independence that comes from having personal spending money," Galbraith says. "We set aside a modest $20 a month for each of us to spend as we pleased, and it provided a huge psychological lift."

If you don't have an inexpensive way to reward yourself, it becomes much easier to throw in the towel.

-- Johnny Galbraith
Co-author, Our Freaking Budget blog

Galbraith says the occasional splurge gave the couple an immediate reward for their budgeting diligence without sabotaging their long-term savings goals. "If you don't have an inexpensive way to reward yourself, it becomes much easier to throw in the towel and destroy all that hard work on one visit to the mall," he says.

Baker agrees that small rewards are important, even if they are just long coffees with a friend, calls to a buddy for affirmation or "positive self talk" every night about the day's accomplishments.

Small pain now, big gain later
Tawra Kellam of Mead, Colorado, also cites the need for both a budget-conscious attitude and lower-cost entertainment choices.

In her first five years of marriage, Kellam and her husband, Mike, paid off $20,000 in debt on an income averaging $22,000 a year. "When you're paying off your debt, you have to realize you're not going to be able to keep the same standards that you did before," she says.

Instead of spending thousands of dollars to go to Disney World, "stay home and do some fun things around your state and your city," says Kellam, who co-edits the Living on a Dime website with her mother, Jill Cooper.

"You cannot have it all," she says. "You cannot pay off your debt and go to Disney World at the same time unless someone else is paying it for you."

She urges people to place their debt in the proper perspective. "You have to realize that this debt is more painful than going without an expensive vacation for a year, two or three," she says.

On the other hand, Kellam -- who is raising five children ages 5 to 17 with her husband -- also has found ways to entertain her family on a budget. When she and her brood lived in Kansas, they would visit the Colorado mountains and save money on lodging and food by staying with family. It was not ideal, says Kellam, but the family got away and had fun.

You have to realize that this debt is more painful than going without an expensive vacation for a year, two or three.

-- Tawra Kellam
Co-editor, Living on a Dime website

A mini-vacation can consist of a Saturday movie marathon every few months in your hometown, she says. Mini-vacations can be more restful than a big two-week trip, says Kellam. "People are getting worn out because they're not resting," she says, suggesting "simple things" like not working on Sunday.

Turn daily indulgences into special treats
People who go to a coffee shop every day or eat restaurant meals several times a week can cut back to once or twice a week, Kellam says.

She notes that decades ago, people ate at restaurants only on special occasions like birthdays and anniversaries. "The problem with our society is that nothing is special anymore," she says.

Kellam's family goes to sit-down restaurants about five to seven times a year for special occasions and date nights. "It's special to us when we go," she says.

It can be challenging to change your mindset from one in which you freely open your wallet, to a more targeted approach to spending, Galbraith says. "We had to make some major attitude and expectation adjustments right off the bat," he says. "We had to sit down and really figure out why this mattered to us so that when an opportunity to veer off came up, we'd be able to remember the 'why.'"

But the process gets easier. Within a few months of beginning their debt-payoff project, the Galbraiths were looking forward to their debt repayments and became eager to increase their payments.

Galbraith and Kellam both recommend visualizing goals. Kellam recalls how her husband placed a chart on the wall to mark off debt payments. It was encouraging to see the family getting ahead, especially as they used a tax refund to pay off the debt more quickly, she says.

Twenty years after paying off that debt, says Kellam, "we're still married and we don't fight about money."

See related: 6 strategies to fight 'frugal fatigue', 5 things people fail to budget for, What helps credit score more: Pay debt all at once? Or in bits?

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Updated: 11-23-2017