Debt – That Four Letter Word
Here’s a quick debt quiz for you to take. You don’t need to send anyone the answers or let anyone, other than yourself, know the answers. You can simply answer them in your head. Be honest with yourself, too. Don’t start making excuses by question number two (Was that new winter coat really essential? Didn’t you buy one last winter that you only wore twice? That, when you really think about it, is actually still fine for this winter…)
Yes, I can almost see you nodding over there.
Let’s get started:
- Are you drowning in debt?
- Do you buy essential and relatively cheap items on credit?
- Are you unable to pay your accounts?
- Do you battle to pay your rent or home or vehicle loan installments?
- Are you in the dark about how much you owe?
- Do you often get calls from your creditors?
- Do your liabilities exceed your assets?
- Did you quite literally spend all the money?
If you answered “yes” to any of these questions, you have fallen into the debt trap.
When you are in debt, you are borrowing from your future. It is not enough to hope or assume that you will be able to pay your way out of it. You need to have a clear plan.
Many people want to find a fast way to get their debt under control.
Here are three things you need to know:
1. Address the real problem. When we feel threatened and fearful, we tend to react first and think second. That’s not a great scenario for making sound financial decisions. Take time to journal about the feelings that you have about spending, using your credit card, and the thoughts that make it OK to whip out the credit card, for that one more thing. Are you using retail therapy to try to heal something deeper? To feel better? Time to be honest with yourself.
2. Don’t move the problem around. Raiding one pot of savings to pay a debt in another pot is simply transferring your problem, not solving it. When you deplete retirement savings to pay off credit card debt, you have applied a “band-aid” to the debt but opened a new wound: Your retirement savings are depleted. Create a list of things that you no longer use or need. Sell them and generate extra cash flow to settle debt faster!
3. Adjust your attitude toward spending. The only way you will ever permanently take control of your financial life is to dig deep and fix the root problem. For example, if you have credit card debt, there’s a very good chance that what needs to change is your spending. To identify patterns, you need to know where your money is actually going….
If you make the commitment to changing your behavior so you can live without financial stress, you will have a vastly richer life.
Here are more steps that you can take, to get your debt under control and move closer to your debt freedom plan!
- Establish what your weaknesses are when it comes to debt. What can you do to avoid temptation?
- Start working out how you can spend less so you pay your debt off quicker.
- If you are unable to repay your credit card account, stop using your credit card right now. If you are reluctant to cut it up, at least remove it from your purse or wallet and keep it in a safe place. Put it in the freezer in a big block of ice if you must… But, please, don’t become this person if you do.
- Make a note of everything you spend money on, during the month. Then look at those expenses at the end of the month and ask which you could eliminate, to save money. We live in a consumer society and don’t realize how easy it is to waste money on things that we actually don’t need to have. Rather use that money to build your savings and reduce that debt fast!
Can you cut down on newspapers, magazines, cool drinks with lunch, coffee and muffins alcohol, sandwiches, snacks on the road, chocolates / sweets, cigarettes? (You’ll also be a whole lot healthier without those! That’s a double win, really!)
These items can add up to a substantial amount each month. It is about being aware of your choices. As you cut them out you’ll have more money to reach of debt freedom date!
For my Debt Freedom Plan template, you can send me an email with Debt Freedom in the subject line!
Over to you: In the comments below, share with me what you feel that you can do, to reduce your debt and start your savings?
Thanks for taking the time to connect!
It makes a difference!