Saturday, November 7, 2015

Being in debt sucks

Being in debt sucks. Being in deep debt really sucks and can affect you in a bunch of negative ways. You worry about how you will pay off your debt so your health is affected by the anxiety.

 Being in debt can lead to relationship issues with your spouse and even divorce. It can lead to loss of opportunities because your credit score is available online and people do look at it.

Employers are even using credit scores as a tool in hiring decisions. The idea being that if you are responsible in your use and management of credit in your personal life than you will be a good steward of the company’s resources.

It may seem that this is unfair but this is how things are. If you are going to take back responsibility for your life than you must first accept reality for what it is and not how you want it to be. Then and only then can you come up with a solution for your debt problem. Admitting one has a problem and overcoming the denial of the problem is a something that must happen before the debt problem can be overcome. While people are trapped in denial they will not be able to develop the motivation to stop their behavior of going deeper in debt and paying down their debt.

I was in debt at one time earlier in my life. My debt problem was tied up in a failed marriage and some other unhappy events at that point of my life. Instead of crying like a baby or ignoring my situation I decided to fix the problem. Fixing the problem did not include being a welch and declaring bankruptcy. I took responsibility for my choices and decided the situation was not acceptable, realized that no one was going to fix it for me, formulated a plan to fix it, and then religiously executed the recovery plan.

Today I am debt free with the exception of my mortgage on my house. I have six months’ plus salary in the bank, an 800 plus credit score, and I am able to invest and build wealth for the future.

How did I do it? First off I decided that I was sick of having the debt monkey on my back and making minimum or near minimum payments on credit cards and not seeing the balances shrink. By the way, the banks love to encourage minimum payments because they want to keep you in debt (remember the debtor is slave to the lender). Go get a pair of scissors and cut up all your cards. If you are in a hole the first step is to stop digging.

The next step was that I made a budget of all my monthly expenses. This is very important and you have to do this in order to make the program work. You have to understand what money is coming in and what money is going out to the literal penny.

Now that you have a budget of your necessary expenses like rent, utilities, food, and other essentials. Note the word essentials. The Direct TV premium package with NFL Sunday Ticket, and the Apple 7 with a Verizon 20GB plan is not essential. This is the biggest trap people in debt fall into, trying to justify frivolous expenses while they are ass deep in debt.

Turn that crap off. You are on an austerity program so get used to living a minimalist lifestyle.
Oh and your gym membership? Get rid of it. Walking and running around your neighborhood is just as good and there is plenty of stuff online for bodyweight exercises. Try this out for an example.

No more going out to restaurants for dinner, buy food at the grocery store and make meals at home. It is cheaper and healthier. Brown bag your lunch and no more Starbucks. If you drink coffee in the morning get your lazy ass up 10 minutes early and make some coffee in your house and put it in a thermos and take it with you, $.25 cents versus $5.00. Are you getting the idea yet? Cut your expenses and apply the savings to reducing your debt.

The next step is list all of your various debts in order of magnitude, for example:

Chase Card       $12,583
Discover Card  $8,742
Car note            $6,518
Kohls Card        $1869

After doing your budget you should know what your excess cash flow is every month. The strategy I used is to attack the low hanging fruit. In the above example make the minimum payments on the first three debts so you stay current. Then devote the majority of your effort to knock out the lowest amount first. After you knock out the first debt continue working your way up the chain of debt but continue to devote the same amount of money even as you knock out each debt. This will probably take a couple of years. Yeah it takes some time and sacrifice. People do not get into debt overnight and it takes effort and time to get out debt.

It will not be fun and it will try your patience but when you finally pay off that last debt you will be free. Free to devote the fruits of your labor to the things that are important to you. You can begin to build a bankroll, invest, and build wealth. You will remove worry and anxiety from your life and you will be back in control instead of the greedy bankers.

It isn’t hard but like most self-improvement activities people already know how to do it they just refuse to actually do the work. Being in debt constricts and limits your options. It creates fear and anxiety. It keeps you from fully becoming what you want to be in life. You now know how to do it so get out of debt today.

1 comment:

Jeffery Surratt said...

This will work for sure. But I pay the most to the higher interest accounts first. I do not care about paying off my $600 15% credit card first or my $160 Kohls account, the interest saved is nothing. I like seeing my total interest payment drop each month. So I pay $40 on the 15% account and $240 on my $2,000, 25% credit card. This way my total interest payments drop more than $10 per month. I will be debt free in 18 months.

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