Most of us living in America right now grew up in a time of instant gratification. The past 60-70 years have seen an explosion of things to buy. These range from cheap toys to new electronics to expensive cars, and also an explosion of ways to buy them.
Back in our grandparents’ and great-grandparents’ day, people had to save up for anything they wanted, but now we have a different credit card for every day of the year. Store credit cards, bank credit cards, points credit cards, travel credit cards. We have mortgages and car loans and even companies specializing in loans for plastic surgery!
The problem with all this easy money is that it can quickly result in a truly miserable life. You don’t need to go on a spending bender to get in big trouble. Just a little unconscious spending here and an unexpected expense there, and next thing you know you’re at risk of being kicked to the curb because you can’t pay your rent. No joke.
Here’s the thing. You know you need to pay for food, rent, phone, heat, hydro and transportation, whether that’s a car payment or monthly bus tokens. You know you have to pay for vet bills and medical co-pay and to get your brakes fixed or your winter tires put on.
These are expenses that don’t happen all the time, but as an adult, you have to be aware that they are coming, sooner or later.
If you’ve bought yourself a flat-screen TV on credit and tickets to an event on credit and your hair and nails on credit, then at the end of the month when you have to deal with the reality of all these payments, how are you going to pay for your brakes that suddenly need to be fixed?
Correct. You will use your credit card.
Do you see how this cycle perpetuates itself? Next thing you know, your paycheck is no longer going towards things you want and need. Instead, it’s going towards paying interest to banks and other lenders.
Charles D’Angelo is a life coach and author of two books including his latest, INNER GURU. He is a young man who came from a poor background and yet owned his own house in his early 20s. Further, he has had a number of luxury vehicles paid off, takes vacations with his loved ones and does it all without ever accumulating debt.
If you haven’t yet become overwhelmed with debt, that’s fantastic. Follow Charles’ tips below to ensure that it never happens.
Step 1: Take 10% of your pay and put that away as savings, every single paycheck
If you made 10% less income, you’d make it work, right? So make it work. This way those unexpected expenses will never catch you by surprise. Also, this will help you save for things you really want later on – the down payment on your dream house, a trip to Tahiti or a new car. With no debt!
Step 2: Write down every single expense you have.
This cannot be emphasized enough. How can you get control over your money if you have no idea where it’s going? Your fixed expenses such as car payments, rent and utilities are usually pretty easy to come up with. But how much do you spend on snacks at the convenience store? What about going out for dinner, or drinks? Do you throw any money away on cigarettes or lottery tickets? What about the surprise expenses we keep talking about? You need to count your car maintenance expenses, even if you don’t pay them all the time. And here’s an expense people usually forget: gifts. Throughout the year you’ll have birthdays and engagement parties and weddings and Christmas or other religious celebrations.
You might be reading this in the summer, but you can’t forget about the $1,000 or more you spend on everyone at Christmas. If you spend even 50 cents a week on something, you need to write it down here.
Step 3: Make an expense sheet.
You may find that your expenses at this point add up to more than your take-home pay. If that’s the case, then it’s easy to see why you’re in trouble! Much as you might wish to make more than you do, you do not. So at this point, you have two options: spend less, or make more money. For some people getting an additional part-time job might be the answer. For others, it might be as easy as cutting out wasteful expenses. That’s up to you – the key is to make sure that your expenses come to LESS THAN 90% of your take-home income. You can manipulate your spending and income as you wish.
Step 4: Negotiate payments on your credit cards
If you are already at the point where you’re in big trouble financially and thinking bankruptcy might be your only way out, it does not have to be. Call up your credit card companies and negotiate payments. You might be able to get your interest rate reduced or even eliminated. Or you might be able to pay only a fraction of your actual debt. The banks that own the credit cards would rather get something than the nothing they’ll get if you go bankrupt.
Step 5: Stop buying on credit!
You may find yourself itching to buy a great deal. The truth is, buying on credit can cost you up to SIX TIMES the actual cost of the item, depending on the interest rate and how long you take to pay it off.
Charles D’Angelo, the author of INNER GURU, says this: “As with any goal, to get to where you are going you must confront the reality of where you’re starting from. The very first step in freeing yourself from debt, then, is being honest about where you are right now. Feelings of terror and being overwhelmed aren’t uncommon when you begin to face this reality. Avoiding or ignoring it doesn’t make it any less real. It just buries you deeper and deeper in the hole you’ve been digging yourself until one day you are buried too deep to escape without bankruptcy. With this awareness you can begin the gradual and steady process of digging yourself out, gaining your freedom.” Get the book here
About the Author, Wendy Morely
From airport infrastructure to health and fitness, there is hardly a subject Wendy Morley hasn’t written about – online, in magazines and as a book author. Her favorite topics remain those that help the reader learn how to enjoy a better, happier, more fulfilling life.