5 signs you're getting out of debt too fast

Anyone who's trying to pay down credit card debt wants to be debt-free as soon as possible. Yet while racing to the finish line may save money in interest, some quick debt-repayment scenarios may actually hurt consumers in the long run, experts warn.

"When you're in debt, you just want to have it paid off so badly and you can't wait until you sign that last check," says April Dykman, who writes about her ordeal paying off $27,000 in credit card debt and car loans on GetRichSlowly.org. Paying off debt is like dieting and crash diets don't work, Dykman adds. "If you're going from spendthrift to tightwad overnight, that's asking for failure."

five-signs-you-are-getting-out-of-debt-too-fast But what's fast for one person may be the right pace for another, so here are some signs that you might want to slow your debt repayment process down.

1. You haven't planned for emergencies
With so many banks offering less than 1 percent  in interest on savings accounts, some people say it's a better investment to use all their money to knock off more expensive credit card debt than hold funds for a rainy day. While you may get out of debt faster using that approach, you'll be reaching for your credit card again the next time your car breaks down. "Life's not going to wait for you to get your credit cards paid off before something happens," says Marcia Brixey, author of "The Money Therapist: A Woman's Guide to Creating a Healthy Financial Life."

While you may not want $20,000 sitting in a savings account while you have $10,000 in credit card debt, use some of your money to create a "baby emergency fund," says Dykman. Having $500 or $1,000 socked away will take care of minor emergencies so your debt repayment plan can stay on track.

2. You're neglecting key areas of your life
While it's smart to scale back on certain areas of your budget to put more money toward paying down debt, some people either cut certain categories altogether or create unrealistic spending plans that lead to problems in other areas of their lives.

"A realistic spending plan has your house payment, utilities, transportation needs, food needs and some clothing needs," says Mary Gresham, an Atlanta-based clinical psychologist who specializes in money behavior. Not only that, but it incorporates socializing, which allows you to maintain important relationships. "It doesn't have to be excessive," says Gresham.  "It could just be enough money to rent a movie and have a friend over."

Life's not going to wait for you to get your credit cards paid off before something happens.

-- Marcia Brixey


Some areas you may not want to scale back on at all while paying off debt include health insurance and retirement accounts, particularly a 401(k) plan that offers a company match. Though you may pay your cards off faster by halting those 401(k) contributions, "you're robbing your future," says Dykman.

3. You're feeling deprived or easily agitated
While a key to effective money management is separating your needs from your wants, some people decide that their needs are the only things they'll spend money on until they get their debt under control.  "It may work for a while, but at some point you're going to say, 'enough of this' and go out on a spending spree and spend way more money than you would if you hadn't been depriving yourself," says Brixey. Even while cutting back, leave a little money for small treats to keep life fun.

Deprivation also can make you unhappy and easily frustrated, which can also derail your good intentions. Dykman remembers getting upset over a broken $15 carafe because the replacement cost would take away from her debt repayment plan. "That was absolutely no way to live," she says. "It's important to pay off debt but quality of life is important as well."

4. You're depending on the good financial habits of others
Many people make a major dent in their debt load thanks to the helping hand of a friend, spouse or other relative. But despite the good intentions, a bailout can often be detrimental to the one who's racked up the debt, says Gresham.

If somebody cleans up your financial mess, you're not forced to change your behavior. As a result, you're likely to run your credit cards up again "and not only that, but you now have the wrath of the family member who bailed you out," Gresham says.

In the interest of keeping the relationship from souring, if someone really wants to help you out, let them pay for financial counseling instead, Gresham says.

5. You're not learning new financial habits
Though getting out of debt can be a long and grueling process, there is some value in that. "I have several patients who have taken four to eight years to turn things around; by the time they're done, they're in pretty good shape in terms of budgeting and planning and spending only cash," says Gresham.

If you're getting rid of the debt by tapping into your home equity or 401(k) account, you're not learning the habits that will help you stay debt-free, says Brixey. She learned that lesson firsthand about 20 years ago when she and her husband used equity to pay off their credit card debt and then promptly used the cards again.

Likewise, if you're simply throwing money at the debt without forming a plan, you're merely reacting to the debt rather than learning how to make better choices in the future. "You didn't plan your spending in the first place, which is why you're having credit card troubles, and you're not planning your payments so they are going to be erratic instead of consistent over time," Gresham says.

The key to successful debt repayment is not looking for the quick fix, but taking it one step at a time. "It's a process of developing better spending habits," Dykman says.

See related: 10 expenses to cut to help pay off credit card debt, Need to pay off debt fast? Prepare to make sacrifices, How to pay off $11,000 in card debt in three years, A generic budget: Guidelines for spending categories

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Updated: 11-24-2017