Getting Out Of Debt Rewards Plan

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!


  1. Greed, Wall Street, or whatever couldn’t explain why all of a sudden greed was given free rein and why the collapse affected everyone at once. Remember the past, when a bank or business that failed, by not making financially sound decisions, only hurt a very small localized group, and remember when it wasn’t so easy to get a home loan or credit card unless you passed all the strict guidelines and there also were financially sound limits based on your income

  2. These truths are self evident and EXTREMELY important! A huge part of debt repayment – that a lot of people overlook – is the need of a proper balance between aggressive debt repayment, and reward for those involved.

    Rewarding not only yourself, but also those in your family is essential for sustained momentum and is also a great financial lesson for the young-en’s. 🙂

    Your point about relating size of debt to size of reward may sound funny but is ultimately a very realistic piece of the puzzle.

    Paying off debt is great… but what fun is it if you do not properly reward everyone involved?

    It sounds like you have put a great rewards system in place and have definitely motivated me to discuss this matter with my wife so we can properly balance our rewards in relation to our debt repayment goals!

  3. Congrats and Disney is MORE fun when you pay cash, right?! I’m already planning a huge party for Winter 2010 (according to Our Plan) to celebrate our final non-mortgage payoff. We’ll probably NOT announce what we’re celebrating, but we’ll know inside!

  4. Good post taking the emotional side of debt payoff into consideration. We all need to stop and enjoy the fruits of our labor, even in the heat of carrying out a major plan of life’s liberation. Otherwise it all seems like labor all the time. (Isn’t that why we have weekends?)

    If we don’t take periodic reward breaks, frustration and drudgery might cause our Old Selves to resurface, and abandon the payoff plan, which can be a major step back even if it’s a temporary run.

    On the snowballing point, though, even though the victories come more slowly after the small accounts are paid off, it’s still a good feeling to know you have fewer bills to pay. That alone is an ongoing reward.

  5. I know exactly what you mean about treating yourself! For the last 1 1/2 years, since I found Dave Ramsey, I had been putting every available cent toward my home equity loan. I didn’t have any small bills to pay off and my house is paid for, but I have a student loan and the aforementioned HEL, so I started out looking at approximately 5-6 years until the 2 loans were paid off. A couple of months ago I decided I needed a break from the debt snowball and started doing a few things for myself, nothing major and no spending sprees, just little things here and there. I feel rejuvenated now and ready to jump back on the gazelle intense bandwagon. I’ve felt a bit guilty not paying any extra every month but when I look at the big picture, a 10-year loan will be paid off in a little less than 4 years… I just have to keep telling myself that.

  6. I think it is great to celebrate the many “victories” we have in life. But excuse me if I’m feeling a little stern about this. Do we need to “celebrate” responsible behavior? I think many times society lulls us into believing we need to be rewarded for every effort that is made. If one has been irresponsible or poor stewards & then makes ammends, do you celebrate that? Or do you simply revel in the satisfaction of doing what you should have been doing all along?

    I agree with “celebrating” paying off student loans or a mortgage, both are debt incurred for future gain, but credit card debt accrued from “good times & fun”…hmmmm, no need to celebrate in my mind. And is that teaching your children that they need to be rewared for doing what is right & responsible?

    Sorry but our parents never celebrated responsibility, they just did it!

  7. Rewarding yourself is such a key element of getting ahead financially and making it fun. Many times we feel in bondage to our debt and even our budgets for that matter so allowing ourselves to have some fun is a great motivator as well as great encourager to continue pressing on towards the prize of being debt free!

  8. I’m kind of with Sherry on this; it’s like a small child wanting a gold star for not misbehaving as opposed to getting a gold star for doing something good.

    Two actual recent conversations in my family:
    me: I paid off my student loan today.
    Mum: good for you dear, I’ll bet you’re glad it’s gone; did I tell you I saw Mrs Neely yesterday?

    2 months later:
    Mum: we paid off the mortgage today
    me: oh wow, very impressive.
    mum: and the dog finally let the milkman pat her.

    Although in my family we were never rewarded for good grades; it was just expected we’d do our best, I guess it’s a similar mindset.

  9. Frugal Dad,

    Thanks for your post. We should all celebrate more often. Life is too short not to celebrate achievements. I also have to agree with Sherry in post #6. Whatever the case may be we should always remember to at least pat ourselves on the back.

    Good luck with everything.


  10. Congrats on almost paying off your next installment bill! I know that’s a load off of your shoulders as well as the bank. Getting out of debt feels great, doesn’t it? We only have a student loan and our mortgage to pay, thank goodness. We have been more fortunate than most and for that I am most grateful. I look forward to hearing more your frugal stories and your plans for Disney. Thanks for sharing!

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