Tuesday, 09 January, 2001

Simplify Your Life:  Get Out of Debt

Want to simplify your life, reduce stress, and regain some control over your financial future?  Get out of debt and don't borrow money again.  No joke.  And I'm not going to ask you to give me any money or even call a toll-free number for important information.  It's a simple process, but takes discipline.

First, stop living beyond your means.  Cut up your credit cards and don't sign up for any new ones.  Then, stop indulging in luxuries that you don't need and hardly even want.  Hang on to your old car for a little longer, and when you have to replace it, go for what you need rather than what you want.  Cook an extra serving or two for dinner and take the leftovers to work rather than going out for lunch.  Pay your taxes on time.  Stop smoking.  Stop buying that double chocolate mocha latté at Starbucks every morning.  Cancel your cable TV subscription.  Buy paperbacks instead of hardcover books.  There are hundreds of little things you can do that, when combined, add up to real money.  For example, eliminating the morning stop at Starbucks and lunch at McDonalds will probably save you $200 a month, which you can apply straight to your outstanding credit card balance.  If you smoke a pack a day, quitting will net you another $100 or so, and you'll feel a helluva lot better too.  Cable TV, digital phone, that second phone line at home, and other conveniences probably run another $200.  You might find that, not only are you saving money, but you're also calmer because you're not constantly worrying about all the gadgets you've let take over your life.

If you go this route, don't get too obsessive about it.  Be sure to reward yourself with a nice dinner out from time to time, or treat yourself to something special periodically.  Sure, you're working toward a larger goal, but enjoy yourself sometimes.  Just don't over do it or you'll end up right back where you started.

If you find yourself working harder and harder, earning more money but falling further behind, stop and examine your lifestyle.  It's very possible that you're letting your lifestyle control your life.  And no matter how much you make, you'll never get ahead.  I'm speaking from experience here.  Five years ago, Debra and I owed a year's salary in consumer debt.  The minimum monthly payments were darned near as much as our house payment!  We crawled out from under by watching what we spend, and by putting every spare dollar against what we owed.  We managed to have a little fun along the way, thanks to my writing, but almost all of our debt reduction came from eliminating frivolous spending.

Today we owe money only on the house, and that's going down fast.  Sure, I could probably invest and earn more than the 8% that my mortgage costs, but I'd still have the mortgage and I'd have to worry about the investment, too.  Looked at in strictly financial terms, paying off the mortgage is a bad move.  But in terms of cash flow, paying off the mortgage is preferable simply because with the house paid off, I have the freedom to take some time off without pay, or even change careers, without having to worry about where the next house payment will come from.

If you're looking to be a multi-millionaire, I can't help you.  But if you want financial freedom and a lot less stress, pay off your debts, and remain debt-free.  You'll be surprised at how liberating it can be.