Living the American dream is becoming a nightmare for some. We are taught to believe that the American way is to develop credit as early as possible. As soon as we turn 18, credit card companies are inundating us with offers for credit cards specifically designed for students. We buy cars on credit, we buy houses on credit, and if we are fortunate enough to have a stable income and show good payment history, there are plenty of credit card companies that will extend you even more credit.
As our credit report grows, companies then begin to extend offers of low or no interest balance transfers in order to get us locked in to their company. Of course, once you transfer the balance, there is more credit remaining for you to continue spending. Before you know it the minimum payments are more than you can handle and you find yourself seeking debt relief. Sound familiar? What do we do to stop the cycle of the debt snowball? Getting out of debt isn't easy but there are many small steps that you can take to begin the process.
The first order of business is to change the way you think about debt. Debt is like a tumor that grows in our life without our notice until it is so large that the situation is seemingly inescapable. Beginning to live within our income range can be a painful process. Look back at the last six months of your credit spending. Were these purchases necessary or simply convenient? I expect you will find spending that was unnecessary and, now as you look at them, frustrating.
Now that you are aware of your credit spending, how many of them were true emergencies? I classify an emergency as an event that unless corrected will stop you from functioning in your normal life patterns. Lets use a car repair as an example. Car repairs are inevitable in the lives of most Americans. They are rarely planned for and most often cost more than we have available in uncommitted money. So where does the money come from? Credit cards, pull it out, swipe it, you are back on the road before you know it. That car repair is going to follow you much longer than you will probably own the car. Why? Because the majority of American's are not willing or able to pay off their credit card balances at the end of the month. There is that tumor, growing and growing.
I want to challenge you to change your way of looking at budgeting. Make it a goal to plan for emergencies. Start small if you have to. Plan to set aside an emergency fund. Even if it is only $500.00. Have a garage sale, sell everything that is unimportant, collecting dust, and make whatever sacrifices you have to make such as not going out to eat until you reach your goal. Whatever you have to do to get the money set aside in less than 30 days.
Rules for the emergency fund.
1. Keep the money in a separate account.
2. Only use the money for true emergencies.
3. Plan to add to the fund until you have set aside at least one month living expenses, experts say three months.
By meeting this challenge you are on your way to reducing debt. Small changes will grow to large ones before you realize it. The tumor will begin to shrink and you will become addicted to reducing your debt. It is like getting income from a second job without ever leaving your home!
A Final Thought:
There are many different theories and ideas floating around regarding topics such as: debt management, debt consolidation, credit card debt, getting out of debt, debt repayment programs, and bankruptcy just to name some that are commonly sought on the internet. My best advice is to seek the most reputable companies in the industry and ask many questions. If things do not sound right and feel even worse, they probably are what they seem. Then check with more companies. You will be providing a lot of personal information that if it fell into the wrong hands could lead to identity theft and more damaging attacks. Being educated and committing to making small changes are steps that once taken should be celebrated, tell everyone of the hard work you are doing and offer them insights as you learn. Being vocal regarding your new commitments will increase your efforts. Good luck!
