Lots in the news lately about our national deficit. While the national debt is an issue I am concerned with, I decided some time ago that I needed to clean up my own household before worrying about the country’s budget.
This was the serenity prayer for finances in action. I needed to focus on the things I could change, rather than worrying over the things I can’t (or at least not directly).
For too long I carried credit card debt on a handful of plastic cards that controlled every aspect of my life. The debt represented years of poor financial management followed by more years of sticking my head in the sand and ignoring the debt that had accumulated.
It wasn’t unusual for me to sit down on a Friday evening and send off half of my take home pay to banks and credit card companies in the form of minimum payments and car loans. You would think seeing 50% of my income disappear would have motivated me to get out of debt sooner, but it didn’t. In fact, a dangerous pattern began to emerge.
Using Frugality as an Excuse to Stay in Debt
Stay with me here.
Because we were living on half of my income, we became masters at frugality. We clipped coupons, reused towels, ate every meal at home, skipped vacations, canceled the cable and on and on. It became sort of a game to see how little we could live on. We got so used to it we became complacent.
It was easy just to send along my monthly payments to the credit card company and live on the rest. Sure, we weren’t making much of a dent in our debt, but we weren’t hurting either. We had plenty of food, a (rented) roof over our heads, a decent car, etc.
Our resourcefulness was now our downfall. Because we were comfortable, there was no push to become debt free. If nothing had changed, we’d still be in the same debt trap we were back then – cash in from paychecks, cash out to credit cards, charge monthly expenses on credit card because we had no cash. Repeat…over and over again, month after month.
Unfortunately, as the debt continued to grow, and the minimum payments consumed more and more of my paycheck, we soon found ourselves not so comfortable.
The breaking point finally came a few years ago when I found myself eating a soggy hot dog from a convenience store on my lunch break because my checking account was overdrawn, my credit card was maxed out, and my wallet was empty. I had to rely on a gas card to buy my lunch. Had I really gotten to that point? Yes.
But it wasn’t just the soggy hot dog that got me to see the light.
It was years of lying awake in bed thinking about what it would feel like to be debt free.
It was the years of getting up every single morning dreading my day at a crappy job that I only stayed at because I felt I had no options.
It was the realization that our debts were taking an emotional toll on our family. I was unhappy. My wife was worried. And our kids could feel it.
We became debt free several months ago now and haven’t looked back. Our family motto is “never again.” As in never again will we go back into credit card debt. From this point forward we will finance our own emergencies, education and occasional luxuries.
If you’re reading this and are in the same state of complacency I found myself in a few years ago, don’t wait for a soggy hot dog to awaken you. Get fired up about getting out of debt.
Back to the national economy. Of course, there is no way for me to predict what might happen to our economy in the next few years. I’d like to think we’ll pull ourselves out of this dive, tighten our belts once prosperous, and begin to repay our obligations. I also recognize this is probably overly optimistic given the hole we’ve dug and the steepness of the climb ahead.
No matter what happens, if your household is a debt free one you’ll weather the storm better than your neighbor who is drowning in credit card debt, paying for a mortgage he can’t afford, and has no savings.
With no debt, and some cash in the bank for emergencies, you can keep the lights on and put food on the table even if you have no income for a while. With no debt you can take advantage of the opportunities that show themselves in tough times.
So sit down today, develop a game plan and get busy becoming debt free.