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Now that
Christmas has come and gone I’ve been thinking about debt. Many go into debt to
lavish gifts and entertainment upon their families and friends over the
holidays. Food alone is a small fortune. It often takes all year to pay off
Christmas debt. Sometimes it takes longer than a year and Christmas debt is
piled upon Christmas debt year after year. Add to that other debt growth throughout
the year and we have people who can’t dig up cash if their lives depended on
it. Instead, if cash is needed, some take it from a credit card. It’s a vicious
cycle---and excessive spending is an addiction.
Fortunes
are made by people who claim they can rid folks of debt. People go into debt
paying for systems (or legal help) that proclaim debt can be eliminated simply
and in a short time. These systems are expensive and plunge the debtor further
into debt and despair. Most people who buy these systems find they can’t stick
to them. Things come up they must buy and they can’t stick to the debt plan one
month then another month then before they know it they are right back where
they were before buying the system---and they are still paying for the system. Once
debt has a person around the neck it’s not easy to get away from it. Some go to
extreme measures to relieve their debt via criminal actions or suicide. Like
drugs, alcohol, and gambling, debt can be an addiction.
Debt
doesn’t crop up over night. It’s insidious and slides into our lives with tiny
purchases or sometimes genuine emergencies. We often buy things we don’t
need---but want. It’s easy to buy that tiny item so that when the next desire
presents itself we spring for it. After all, it’s only a few dollars more a month.
This continues, especially with those inexperienced in money management, young
people and people managing an income alone after a divorce, or any number of
circumstances, until one day the person wakes up and realizes they are in a
terrible bind. Then real debt builds as they take on debt to pay off debt. It’s
a trap set by commercial entities. We are bombarded with offers of great
discounts and wonderful goods at incredible price reductions for goods we DON’T
need and tiny payments. Because we’re worth it. That's a lie for another blog.
The
first factor in determining how we got into debt is to simply stroll around our
homes. How many items do we see that were purchased on credit? How many items
did we save for and buy with cash? Do I hear laughter? It’s true. Who buys
anything anymore with cash that has been saved for a special item? (My son does
which I will explain a bit later.)
Some
items are difficult to save for. Most of us need a car. If we live in a major
city we do not need a car and some enlightened urban dwellers do not buy cars
but take public transportation (only in cities where it works---our old
transportation systems need repair today but at one time our cities had great
public transportation). If a car is needed then those folks rent cars for
weekend trips. Of course, they need a credit card to do that. It amazed me the
first time I rented a car that I had to have a credit card. I wanted to pay for
it with cash. What kind of world do we live in where we MUST have a credit
card? I think it’s so that if we destroy the car or do something to it they can
come after us via our card. My daughter went on vacation and the rental car
agency added huge additional charges a couple of weeks after she got home. She
fought the charges and won. It was a battle.
So after
we evaluate our homes and analyze what we purchased with credit we then learn
whether or not we needed the items or wanted the items. There’s nothing wrong
with wanting something---if we can afford it. If we want something and can’t
pay for it, we should save for it. (Oh, stop laughing.) We simply make a
payment to ourselves monthly until we’ve saved enough to buy it. Better to make
the payment now than after. So many nasty things can happen after when there’s
no money but the paymen(s) linger. If we are saving for a TV now and the
engine falls out of our car on the freeway, we can dip into our TV savings and
fix the car. (Can’t we charge the car repair? Oh, of course we can because we
decided we need a car.)
But
putting big ticket items aside like cars, refrigerators, heaters, etc., they are not
what truly gets us in debt. It’s the hundreds of little things we buy on
credit. That we don’t need but we want. We want some things so desperately we
are willing to go into debt.
How many
pairs of shoes does a person need and of what quality? I’m hard on shoes. When
I used to buy expensive shoes in only a few weeks I’d scuffed them and scraped
them (how do I do that) and was horrified. Now I buy some medium priced shoes but
mostly very cheap shoes that I beat to death and I don’t buy many. When they
are bad I dump them and replace them. How many pieces of jewelry do we need
(none, actually), or how many decorative items for our homes that we are
willing to go into debt to purchase? In fact, how many electronics do we need?
None. It’s true. None. Remember it’s all about need v. want. But I have every
electronic gadget ever invented and the minute it’s outdated (which is usually
the day after I buy it) I want the updated version. I’m guilty too.
So over
a year ago my son decided he wanted a top of the line laptop. He researched the
various computers he was interested in and eventually found just want he wanted
and in fact special ordered an upgrade and his computer is so slick he could
run the Pentagon with it. Then he purchased a couple of accessories for
it---all with cash. He saved for about a year. He did without many things. He
dipped into his savings for a couple of small emergencies (one car emergency
and something he needed for work). His computer is very expensive and it’s 100%
paid for. I have friends with outrageously outdated computers they are still making payments
on. Some are still paying for old computers they no longer own. I have two and
both are paid for.
Delayed
gratification. We’ve all heard that term. Sometimes it has a sexual connotation
but it also applies to other desires, the desire to have goods we want and we
want them right now. Maybe it’s because I’m older now and wiser (I hope) but
there is nothing I want so much that I would go into debt to have. And mind
you, there are many things I actually do want. Just not enough to go into debt.
Of
course, I do have a big fat mortgage and that is certainly debt. But as debt
goes it helps me at tax time and it’s my little nest/home. But I know some who
are rethinking home ownership and all of its repairs and maintenance and many
in my age group are dumping their homes for the ease of renting a nice
apartment somewhere. My mom still lives in her home and recently had expensive
termite work done and I’ve had dry rot repair going on for weeks. An apartment
is very appealing right about now.
So
here’s how to get out of debt and my advice is free. Stop charging stuff. Do
without. Only buy essentials (groceries, medical care, dog food) until the debt
is gone. Have a huge garage sale. Take that money and pay off some of the debt.
If the debt is tremendous and completely out of control consider bankruptcy. Some debt people have is because they lost their jobs.
Most is because we spend too much for things we don’t need. Don’t spend, don’t
charge, one step at a time. Make a list of what is needed to live and every
time a purchase is considered ask if it’s needed---or wanted. Depending on the
debt it could take a long time to pay it off. That’s fine. If the job market is
not cooperating, consider asking for government assistance if it might apply to your situation. That’s why it’s
there. Don’t be embarrassed. Everyone needs a little help once in a while. Life
is too short to live with stress every day. Find ways to pay off the debt, all
of it or some of it, then never accumulate debt again.
Over the
years I’ve kept a list of things I want which is separate from things I need.
The list is long but when I review it from time to time I cross items off the
list because I no longer want them. I wanted the items when I placed them on
the list but now they’ve been on there for so long I’ve realized I actually no
longer want them.
I know
people who have comfortable incomes and buy whatever they want but they still
use credit for the purchases. I’m not sure I understand that because when the
you-know-what hits the fan, and none of us are safe, those debts will ruin
them. When the comfy income goes then what?
I guess
I should point out it’s easier for me to not buy things because I don’t like to
shop. For those who love to hit the mall on a regular basis to buy things “on
sale,” ew. You don't save money buying things on sale. You spend it. Think about it.
[No part
of this content may be reproduced, stored in a retrieval system, or transmitted
by any means without the written permission of the author. Blog series began in
March 2009.]
