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Sitting on her living room floor, Margaret diligently added up her credit card bills. She had done it again – wracked up a $20,000 debt and that didn’t include her $150,000 mortgage. It was time to take action she decided. She gathered all her cards dumped them into a bucket of water and froze them in the refrigerator.
 “It’s a bit drastic, I know,” she said. “But I had to stop spending and using credit cards.”
Actually Margaret was right on with her thinking. To borrow a phrase from Dave Ramsey and his My Total Money Makeover, to get out and stay out of debt you have to “live on less than you make.” It’s a very simple principle that starts with saying good bye to credit cards.
Be like Margaret and freeze your cards, if you must, or cut them up, but try not to buy anything unless you can pay cash for it or have it directly come from your bank account. Building more debt while trying to get out of debt is counter productive.
In fact, look at ways you can cut your expenses. Consider cutting down on the number of days you eat out or go to lunch. Just look at the numbers, depending on where in the United States you live and what you eat, the average lunch is about $10. That’s $50 at the end of the week, $200 a month, and $2,400 by the end of the year – money that could be used to pay off an existing debt, invested or put into savings. Bring your lunch to work. Besides a home cook meal always taste better than anything you can buy.
It pays to plan
Having a saving plan is another good way of getting out and staying out of debt. Start with a beginner’s emergency fund of about $1,000. This saves you from having to take out or “unfreeze” that credit card in case of an emergency, like a car repair.
Once you have that first emergency fund set up work on saving at least three to six months of expenses. This protects you if the worst should happen and you loose your job.
It’s also going to take sacrifice. Look around for items you recently bought. Do they still have the tags on them? If so, return them to the store. The same for stuff you no longer need. Do you have CDs, books, clothing you never use? Consider selling them either on online auctions or to resale stores, and put all these extra funds toward paying that debt.
It’s the same for windfall money. Instead of splurging all that tax return, put most of it toward the debt. Apply all those checks you receive as Christmas or birthday gifts toward your debt.
A bigger paycheck
If you find that you still don’t have enough of an income to pay off your debt, look for ways to bring in more income. Get a second job, work overtime, or assess your skills and talents. If you are good with computers, start charging people to repair their computers. The options are limitless, depending on your talent. You can teach at a community college, tutor, sell short stories, and sing at a local bar. Just find what you are good at and put it to work for you.
Finally and most importantly, don’t lose hope. There are going to be days when the temptation to take out that credit card to buy those shoes, that computer, that new gadget you’ve been craving. Before you do, stop for a moment, close your eyes and visualize your debt free life. Isn’t that life worth the current sacrifice?
Copyright 2007 DebtPointLive.com. All rights reserved. This material may not be published, rewritten or redistributed.
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