Lately I’ve been reading quite a bit about the new laws that apply to credit cards. Some articles are about how the credit cards companies still have loopholes to get us in other ways. Do these “reforms” really matter to most folks and is anyone really surprised by the fact that the credit card companies will find other ways to make money?
None of the legal reforms matter if you control your debt affairs properly. That’s the bottom line. You’re not at the mercy of the credit card companies and Uncle Sam is not your salvation. You have the control over your finances, always have and hopefully always will. Take back your power to control your destiny! These reforms mean more to those who use credit unwisely and the unwise will still get burned in the long run; reforms or no reforms. Laws can never compensate for questionable financial behavior.
Are you in debt in a bad way? I’m talking about where your debt never goes away and where debt is how you get by month to month because there is not enough money coming in to cover your life. There is a solution but it’s not easy and it takes supreme discipline. You’ve got to collect the financial data of your life and apply a structure to break debt’s hold on you. It’s hard because you want a higher life style than you can afford. You have to get a grip on the fact you can’t keep up with the Jones and won’t get everything you want. But you’ll get what you need—and you’ll be happy with that. The game plan…
First. Collect the data that indicates all the dollar outflows for your month. Group the outflows into categories like, rent, mortgage, car payments, credit card payments, food, clothes, cable TV, entertainment, on and on. Now put them in order of most important to least important. Now the hard part; discontinue those expenses that are the least important until you have more money coming in than goes out. Say good bye to all those luxuries. If it’s more than you can afford, it’s a luxury. In a worst case scenario, you may have to come to grips with the fact that your abode is more than you can afford requiring you to downsize.
Next. Rank order all the debts from the one with the highest interest rate to the one with the lowest interest rate. Pay the minimum payment on all the debts except the one with the highest interest rate. Pay the minimum plus add an amount to it that you can pay every month until the debt is eliminated. For example, if the minimum payment is $30, add another $50 to it and make the $80 payment religiously every month until the top debt is eliminated. When it’s gone, add the $80 to the minimum payment of the next debt’s minimum payment. For example, the second debt’s minimum payment is $25 and you add the $80 from the eliminated first debt for a $105 monthly payment. Continue this “snowball” process until your debts are eliminated. The key here is paying more than the minimum payment. Only paying the minimum each month ensures you will never get out of debt.
Finally. With the money you were using to pay down debt, keep the money out of your pocket by setting up a direct deposit plan from your pay check to a savings account. By this time, you are used to not having the money as it was paying the debt. Stay accustomed to the money staying out of pocket by having it deducted from your pay check.
Your financial health is dependent on you living below your means. If you don’t like your standard of living, fix it by doing things necessary to raise your standard of living. Change jobs, go to school, get training, seek out special expertise or new responsibilities on the job, get certified, do anything but use credit. Using credit does not raise your standard of living; it puts you in a hole and gives you a false sense of accomplishment. Credit is faking it and only hurts you. Take back the power.
