Getting out of debt is like losing weight: It is much easier to put on than to take off, and it often sneaks up on you slowly. Just as no one consciously decides to get fat, no one sets out to go into debt. Many people underestimate how much they spend as minuscule purchases add up. You may be an impulse buyer who lives in the moment and refuses to think about how much debt you are racking up. Or you may have grown accustomed to a particular lifestyle, and decided you cannot live without certain luxuries, no matter what the cost. Most often, getting deeply into debt is caused by spending behavior—living above your means. Whether you are already in debt, or you have decided not to get into debt in the first place, following through will require discipline, patience and restraint over the long-term.
Staying out of debt
If you’re not already in debt, you need discipline to keep from accumulating debt. You may feel societal pressure to buy, buy, buy, so you can have, have, have. Or you may have grown up in a world where you were used to getting things you wanted quickly. You can microwave a meal in one minute, you can quickly and easily download your favorite movie or television show without commercials whenever you want, you can quickly access information on your high speed Internet computer or smart phone and you can have that big-ticket item or that gas fill-up with a quick swipe of a credit card. Get it now, pay later.
This is why it is so easy to get into debt and so difficult to stay out of it. You’re used to having things you want when you want them. Yet when it comes to staying out of debt, you have to go against the get-it-now mentality you have been able to enjoy in nearly every other facet of life. Since you must go against your own nature, you have to do so consciously and you must focus on tomorrow rather than today. If you purchase this item today, how will that affect your financial picture tomorrow, next week, next month or next year? When will you pay for it? How much more will it cost to pay with credit?
The best way to avoid foolish credit decisions is to have a financial plan. Decide ahead of time how much credit you really need, and under what circumstances you will allow yourself to use credit. You need to know how much money you have coming in and going out towards living expenses. Although many people don’t like the word “budget” because it seems to represent restrictions, a budget is nothing more than a written plan of how to make the most of the money you have coming in. A budget is also an excellent training tool in self-discipline. If you can stick to a budget, you can control impulse spending. While budgeting, you should also include savings as a “living expense”. This can serve as emergency money, so you can pay for unanticipated expenses with your savings, rather than credit. Living this way consistently requires commitment and dedication to long-term goals.
Getting out of debt
Getting out of debt takes even more determination than staying out. The first step is often the hardest, but it is absolutely necessary: you must face your debt. You may have started a pattern of running from your creditors. Now it is time to start running towards them. You need to know how much debt you owe in total and to each creditor. You will have to talk to your creditors, knowing they may pressure you. Sometimes, they are unkind and inflexible when trying to negotiate reduced payments. You may even have to enlist the help of a reputable credit counseling center to negotiate on your behalf. Either way, you will not be able to accurately assess your debt picture without communicating with your creditors at some point.
If you have accumulated a debt through poor spending habits, you have the added difficulty of changing well-formed habits. The first step is to put an abrupt halt on all credit spending. If you can’t afford that item you want with the resources you have on hand, then you can’t afford it. You cannot simply moderate your spending and get out of debt at the same time, just as a recovering alcoholic cannot moderate his drinking. All credit spending has to stop—no exceptions.
Next, you will have to put yourself on a budget, and include savings and debt repayment as part of your budget. This process will help you get out of debt as well as teach you restraint. You will have to learn to control all spending. You may find it difficult to put money into savings when you could spend it. You will probably cringe as you see large amounts of hard-earned money disappear into debt repayment, leaving you with nothing to show for it. You must remember, though, that you have already received the benefit of that money through the purchases you made previously.
When you’re used to spending without restraint, getting what you want right away, you may find this new lifestyle unbearable at first. Yet pressing through the initial difficulty will result in rewards. Over time, if you stick to your plan, you will have money in the bank, and you will enjoy the shrinking numbers that are your debt. When you come across something you want to buy, or an emergency, you will have a savings account to pay with. Then you can purchase the item right away and not have to pay later. Of course, you will use up money you had saved, but this will cause you to be more restrained about your purchases. Credit is so easy to use without thinking about it, that often you may purchase things you didn’t really need. Yet when spending your own hard-earned cash, you will tend to think carefully about each purchase, resulting in purchasing less and saving money in the long-run.
Changing your spending habits so drastically takes more restraint and discipline than many people have. This is due to a shift from immediate to delayed gratification. It requires you to suffer or at least sacrifice something you want now, so you can be better off in the future. If you are not used to thinking that way, you may need some support and training. You can find this through a variety of credit counseling centers, debt negotiators (make sure they are reputable), and various finance courses. If you have supportive friends and family who are wise in financial matters, you may also be able to turn to them for help. Getting help with debt can be humbling, but if you want to get out of debt, you must do whatever it takes.
You also need a debt repayment plan. Planning may not be second-nature if you are used to just buying everything you want on credit, but it is a worthy undertaking. Once you know how much debt you owe, you need to determine how soon you want to be out of debt, and how much you will have to pay each month to reach this goal. Once you commit to an amount, you plan your strategy. You may want to pay off your lower balances first, so you can get down to having just one bill. Or you may decide to focus on the higher-interest accounts first, which will result in less interest in the long-run. Either of these plans has merit, and you may have yet another effective plan. As balances are paid off, you will then shift that portion of the payment towards the creditors you still owe, so that the debt repayment budget remains the same until all debts are paid off.
Whatever plan you use, you must pay well over the minimum monthly payment on each account. The way credit card debt accumulates, you will never get out of debt paying only the minimum monthly payment. If this is all you can afford, you may have to think of ways to make extra income, such as a second job. This is a short-term sacrifice with a lifetime of benefit. The more you train yourself to think in the long-term, the easier this will become.
Finding yourself deep in debt creates feelings of being overwhelmed, trapped and helpless. In order to change your situation, you must change deeply ingrained habits and thinking patterns. You must go from being a spender to a saver, from being a here-and-now person to a future-minded person. You will have to learn how to make do with what you have. You will have to be patient, even if you are not a patient person. If your debt is very large, debt repayment could take a year, or two years or even longer. You may have to face embarrassment as you ask for help. You may find yourself feeling deprived at times. If you’re determined, you can do it, and you’ll be better for it. The debt may seem overwhelming and impossible, but if you chip away at it slowly over time without giving up, it will eventually be gone. You will constantly have to remind yourself why you are doing this. Knowing the benefits and staying focused on the goal will help you become debt-free, and teach you the discipline needed to stay that way.