Getting out of debt — even very serious debt — is doable when the proper steps are taken.
Never spend your money before you have it.”
— Thomas Jefferson
Being in debt is a common complaint many people have. But if you ask them how much money they owe or whether they have a budget, you often get a blank look. And should you be bold enough to suggest that they cut back on some expenses, they either refuse outright or look at you as though you have two heads.
This kind of attitude is a sure sign that these people will find it almost impossible to ever get out of debt. If they’re not willing to change their mindset and start down the path of working hard and making sacrifices, the odds of becoming free of debt are definitely stacked against them.
Once someone gets deep into debt, even if they are doing all the right things to get out of it, there’s no cure-all or quick fix. People generally don’t get into debt quickly (unless it involves a foolish gambling debt), and they sure don’t get out of it quickly (unless they manage to win a big lottery jackpot).
So what’s going on with these people? Well, obviously, their spending habits have gotten completely out of control, which is due in large part to not having a budget by which to live (and spend). They don’t know how much money they have at any particular time and thus don’t know how much they have left. They are irresponsible in using their credit cards, treating those cards as if they are a source of nearly unlimited funds. Credit card spending that’s out of control is a leading cause of people winding up in severe debt.
When people's spending habits are reckless and irresponsible, the inevitable result is financial chaos and potential financial disaster, including the possibility of bankruptcy. Sadly, children generally don’t learn good budgeting skills while growing up, meaning they are often clueless when they become adults.
Okay, assuming they find themselves in a bad situation debt-wise as adults, what should they do? First of all, they should make a realistic budget based on their funds at their disposal each month and then follow it religiously. Besides accounting for regular expenses each month, such as rent, utilities, gas, etc., they must make sure they’ve set aside some money to pay back their creditors.
On top of all this, to the extent possible, they need a “rainy day” fund to be able to deal with unexpected emergencies that inevitably show up (e.g., car repairs), especially if they don’t have insurance to cover those types of things.
The bottom line is that people need to take full responsibility for their own finances and do what’s prudent and right regarding how they spend (or don’t spend) their money. If most people have a set amount of money coming in, that’s what their budget must reflect. Pretending otherwise won’t do them any good.
Home life ceases to be free and beautiful as soon as it is founded on borrowing and debt.”
— Henrik Ibsen
If there’s something they want (or need) that their budget won’t allow them to pay for, then their only option is to free up some money by cutting back on spending somewhere, such as by getting rid of cable TV service in exchange for a much cheaper online streaming service.
There are probably other areas that can be cut out entirely or trimmed back to save money for other things. But the only way to get a good handle on expenses and spending is to budget properly because many people don’t know how much they spend each week or per month. A person doesn’t have to turn into a miserly penny pincher, but they have to spend their money wisely to avoid debt.
Someone who’s in serious debt literally can’t afford to spend much money on wants; their focus has to be on spending only on absolute needs. Improving their debt situation requires developing and maintaining proper spending habits. They need to replace their bad habits with good ones, which they can do over time by exercising discipline and willpower. The great news is that it’ll get easier each week.
What’s also extremely helpful is to develop financial goals to work toward, such as becoming debt-free by a certain time in the future. Achieving this goal helps with other important goals someone may have, like taking a vacation or buying a home.
What works best is to write down these goals and then keep them in mind within overall budget constraints. However, these goals need to be somewhat flexible and not set in concrete. The immediate concern is to change spending habits and get things going in a much more positive direction.
Becoming debt-free is well worth all the discipline and hard work it takes to live within a realistic budget. The financial freedom of waking up every morning without having to fend off creditors, being able to take a needed vacation, not worrying about medical or other emergencies sending you into bankruptcy, etc., is very nice indeed.
Bad debt is debt that makes you poorer. I count the mortgage on my home as bad debt, because I’m the one paying on it. Other forms of bad debt are car payments, credit card balances, or other consumer loans. “
— Robert Kiyosaki
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