Debt is the subject of talk shows, news items and even jokes. The reality TV series "Until debt do us part," has even been a hit. However, debt is the cause of many marriage breakups, job losses and suicides as well.
Being in debt is not necessarily an evil thing, in spite of what many religious leaders have warned over the centuries. Indeed, there can be such a thing as "good" or "creative" debt, such as borrowing money against your home, and then investing it wisely and thoughtfully, while "writing off" the interest on the borrowed sum on your income taxes. We will discuss this strategy later.
Still, falling into debt is no laughing matter. Many people end up trapped in a cycle of "bad" debt, borrowing money all the time to purchase things that will only drop in value, or depreciate, such as an automobile or big screen television. I am personally alarmed by the gigantic debts being run up by university students, often thanks to credit card companies handing out credit cards like candy.
Let's face it, most kids who go away to school at the age of 18 or 19 have had their parents doing their laundry and buying and paying for their groceries - not to mention making their beds. Over the previous two decades they were never taught how to budget or even pay bills which quickly add up to large debts. Most of these young people should never use credit cards in the first place, however, once they do, they quickly find themselves straddled with 12%, 18% or even 26% interest and fees on their monthly bills.
Ask yourself these questions?
- Do you find that you are constantly concerned about your financial situation?
- Are you always paying your bills late?
- Have you started to get calls from creditors about "unpaid bills"?
- Have you "maxed-out" your credit cards, and begun to carry large amounts forward each month, paying only "the minimum amount due?"
- Is a larger and larger amount of your net income going to cover merely the interest on the debts you owe, without even touching the ever growing principal?
Here is a simple strategy you can implement to get out of debt:
Establish a budget and track all your income and expenses
There is usually one person in the relationship who handles the money and pays the bills. When I ask if they follow a budget, the answer is usually "no"; however, they feel they know where the money is being spent. I personally am very specific when it comes to my budget. I review and allocate every expense so I know where my money comes from and how it is being spent.
The process is relatively simple. I just take one of the envelopes that my bills come in and write the current month on it. Anything I buy gets logged on a monthly sheet and the receipt placed in the envelope for that month.