Being broke—I mean really broke—can be scary. But the stress can be manageable with the right attitude and self-control, right? I’ve found that the fine line between living on the edge and a downward spiral into hopelessness is one factor: DEBT. Thomas Gnomologia said, “Debt is the worst poverty.”
Debt isn’t just a healthy car payment or a stress-free, low-interest loan for most people. It’s often times an overpowering force that leaves folks feeling helpless and hopeless. At least, that’s how I’ve felt in the past. Not being able to pay off my debt kept me feeling, well, indebted. I felt like I was wearing a sort of invisible shackle.
“A man in debt is so far a slave.” -Ralph Waldo Emerson
The word “debt” actually has two meanings: 1) Something owed; an obligation to pay and 2) An offense requiring forgiveness. Though we’re more familiar with the first meaning, being caught in a downward spiral of debt leaves most feeling an intense amount of guilt—almost like we know we’ve done something wrong (usually a lack of self-control with our spending) and we spend years fixing it. They say that the average American is over $15,000 in debt. Wow.
They’re also saying that folks with high debt suffer from more health problems than those with no/low debt, like headaches, anxiety, depression, heart attacks, digestive tract issues…you get the point.
“Debt can turn a free, happy person into a bitter human being.” -Michael Mihalik
Debt sucks. And if you’re not actively paying off your debts, then you’re living in a naïve dream world (like I did for several years of my life). It’s easier not to worry about it, I know, trust me. It’s like turning up the music loud in your car so you don’t hear the clanking engine. You may think you’re saving yourself from stress by not worrying about it. That makes sense. But think about it this way: You’re spending a ton of cash every month by ignoring it. Just add up the amount of interest you’re paying per month and ask yourself if that amount is worth paying to ignore the stress.
Getting out of debt probably feels impossible to you, like it did for me. Over the past 6 months, I’ve paid off almost all of my debt–something I thought would take years to do. I can tell you, it’s not as insurmountable as it sounds.
Like anything in life, you can’t make a change for the better unless you realize that your situation is changing you for the worse. You have to hate debt. You have to be fed up and decide that no one but YOU will control your bank account. If you don’t hate it yet, proceed to step 2 and I’m pretty sure you’ll come around.
Lay it all out on the table. Be proactive and go pull a credit report right now, take all of your credit cards out of your wallet, write down your interest rates, look at your debt right in the eye—every piece of it—your credit cards, your house, your car, your schooling, that loan from your parents, everything. How much do you owe? What are your interest rates? How much are you spending per month on interest alone? Write it down. Make a chart. Do whatever you have to do, but be brutally honest with yourself.
This is the hard part. You’ll probably need a glass of cheap red wine after this. Don’t be surprised if you’re a little depressed after this session. The only way is up.
“If you aren’t in over your head, how do you know how tall you are?” - Unknown
Before you start funneling money in the right direction, you have to stop funneling in the wrong direction. If you really hate debt, you have to be willing to live a little extreme for a while until you get your bank account under control. You may need to stop going out to eat, going out to expensive movies or spending money on unimportant, expensive things.
Do you really need a cell phone upgrade, that new pair of shoes or that remodeling in your kitchen? You might…but do you really need it RIGHT NOW? Put first things first: your debt. Focus your attention on one thing at a time.
“The man who never has money enough to pay his debts has too much of something else.” -James Lendall Basford
My brother gets what he wants. Phone representatives quiver when he calls. My brother has taught me that you can’t get something unless you ask—confidently. There’s a good chance that your interest rates are way too high, and it could be because you’ve been late on paying your bills. The creditors aren’t required to help you, but they might. Call all of your creditors up and ask—confidently—if they would be so kind as to give you a lower interest rate.
These days, with the R-word (recession), and if you’ve been late on your payments, there’s a good chance they’ll say no. Try anyway, and don’t be discouraged. When I was in college, I called up my credit card and asked for a raise in my credit limit. At first they said no—until I explained that I was a striving graphic design student and needed the money for a computer and software. They gladly agreed.
Find more money! No really–it’s not magic. Lay out all of your automatic payments for services for the month (i.e. Netflix, cable, etc.), and really ask yourself if you can live without them for a while. If you can survive, which I know you can, cancel them for a while and put that money towards your debt payment.
This may be a perfect time for you to round up the debts that other people owe YOU. It’s awkward, but at least you can use your newly acquired hatred for debt as an excuse. Just say it’s your “aggressive debt plan” and it’s “in your workbook” or something.
Sell the crap you don’t need. I do this regularly. If you haven’t used it in a year, sell it. Do a yard sale, get rid of all of the clutter and crap in your house. Suze Orman says that if you struggle with debt, you probably have a cluttered house. Go figure!
Can you get another part-time job? Even if it’s temporary—do you have any spare hours in the day to make more money? Can you work any overtime? Use every cent of what you’ve earned and pay it towards your debt. If this is overwhelming for you, jump to #9.
Everyone I’ve ever talked to about debt tells me this. If you don’t have a savings account, start one at your bank. It’s free. Put away at least $1,000 in a no-touchy savings account. Only use it for an EMERGENCY, like your car breaking down or if you’re about to get evicted. Otherwise, no-touchy. This $1,000 will probably take you a few months to find, at least. Just keep plugging away and add a few bucks here and there when you can.
I auto-pay everything, even a small transfer every month from my checking into savings. I don’t miss the money if I don’t see it in the first place. In a very short time I’ve saved up a few emergency funds!
Consolidating your loans has a lot of benefits. First, you have one, single monthly payment instead of several. Simplify your expenses! If you have a bad habit of paying your bills late, you’ll reduce the potential for late payments, fees and even the amount of calls from the creditors too.
By the way, STOP THAT. If that’s your bad habit, you’re ruining your credit. It’ll stick with your credit report for 7 years, I believe. If you’re forgetful, like me, and you have enough in your checking, sign up for auto-pay!
Transfer your balance from a high interest rate card to a lower interest rate card. If both of your interest rates suck, perhaps consider a new, no-frills, low balance credit card—but if your credit sucks (and you know this because you were a good girl/boy and pulled a credit report, right?), then hesitate on even applying for a new card. Creditors are especially stingy these days and the more times you’re denied a credit card, the worse it is for your credit. Vicious cycle. If you can’t consolidate, it’s okay, move on.
You’re on a mission. You’re competent, you’re capable, you’re powerful, now DIVE DIVE DIVE! Ahooga! Ahooga!
But seriously, you can do this.
There are 2 theories about which plan of attack is most efficient:
1) Suze Orman says that you should aggressively pay off the credit card with the highest interest rate first. Technically, this makes sense because you’re spending more interest per dollar on these cards.
2) But Dave Ramsey has a different approach, called the Snowball Plan. Dave says you should focus your attention on the smallest balances first, no matter what the interest rate is. This will give you a sense of accomplishment and boost your self-confidence.
Both methods are great, so there’s no wrong answer. If you’ve never been able to dig your way out of debt and all of this is very overwhelming, I think you should start with the Snowball Plan. Pay off the low balances first and tackle the big ones after that.
Don’t be a pansy and just pay your minimum payment on your credit card. Come on, be a man (or woman)! That’ll take you until the end of time to pay off unless you pay over and above the minimum. Be extreme. Pay 2x, 3x, 4x, 10x the minimum payment–as much as you can bear, without causing yourself too much stress, of course. Remember, you’re PAYING for this interest.
“If you don’t like something, change it; if you can’t change it, change the way you think about it.” – Mary Engelbreit
When I was a kid—probably about 5 or so—my best friend and I got locked in my mom’s bathroom while the parents were downstairs. We didn’t know how to unlock the door. At that moment, our world crumbled and we burst into tears because we were convinced that we would probably stay there forever–and I specifically remember screaming that witches would kill us. (For the record, our parents did let us out. And yes, they thought it was hilarious.)
The older I get, the more I’m able to cope with “seasons” of life. When we’re children, we have no concept of this. Our current state = the rest of our lives. But if you’re old enough to be in debt, you’re old enough to understand that not every single season in your life is destined for greatness. If you’re in debt, you’re eventually going to have to go through a rough season to get out of it. You may have to sell more than you’d like, or get another job to survive, or eat cheap food and stop going out for a while.
“Rather go to bed supperless, than rise in debt.” -Benjamin Franklin
But don’t be discouraged like I was at 5 years old in the bathroom. The witches aren’t going to eat you and this isn’t the end of the world. Put on your big girl/boy panties and do it. This is just a season. You may have to work your butt off and life might be a little lame for a while, but it’s only temporary. As Dave Ramsey’s book, The Total Money Makeover says on the bottom of every page, “If you will live like no one else, later you can live like no one else.”
“Prosperity is a great teacher; adversity is a greater. Possession pampers the mind; privation trains and strengthens it.” - William Hazlitt
I’m no financial advisor—so if you’re seriously in debt and need help, here’s a great place to get started.
Those are my 9 words. What about yours? Disagree with anything? Let’s hear it…