Free Yourself from the Prison of Debt

A huge problem that is affecting many Americans is debt. What exactly is debt? Debt is defined as money, services, goods or anything else of value that is owed by one person to another as the result of a previous agreement. Debt can be the direct cause of family, legal, and physical, and mental stress. I should know....I was in debt at one time, and it caused a great deal of mental stress to the point where it was constantly on my mind. According to Proverbs 22:7, "The rich rule over the poor, and the borrower is slave of the lender" (NRSV). It doesn't matter if you're a believer or not, but the bottom line is that when you are in debt, you become a slave to your credit card, you college, your loan. You become a slave. Face the truth, do not ignore the facts. Ignoring your problem has a negative impact on your life and credit. If you have a family, tell everyone in the family that is able to understand the situation. Work as a family unit to eliminate your problem of debt.

DESTROY ANY CREDIT CARDS IMMEDIATELY.

It's understandable that you probably have heard this a million times, but one of the first things to do if you have bad credit and own a credit card is to obliterate your credit card. Destroy It. Get the strongest pair of scissors that you own and go to town on that credit card. What does this do? Let me explain. A credit card buys you time. When you're paying that interest, you're paying for the time you are borrowing from the day that you bought the item. Think about this: $9,000 in credit card debt can take you 32 years to pay off and cost you $22,000 in interest if you pay just the minimum payment. Destroy the credit card. If you absolutely have to use "plastic", get with your bank to set you up with a debit card. A debit card can be useful if you have to buy things over the Internet or to not carry cash on you at all times. Debit cards remove money you already have from your bank account. You still have to be careful, however, because if you withdraw funds using your debit card, and you have no funds, you will be charged an overdraft fee. If you don't know that how much money you have, you can inevitability get charged an overdraft fee for everything that you have bought while your bank didn't have money. This could add up quite a bit. I myself have had a big debt from withdrawing money from the bank account using a debit card...but the truth was, there was no money in there, and I was just digging myself into the negatives. If you are going to use a debit card, write down how much you have in there. Every time you use your card, make sure to keep track of your expenses by writing that amount down and subtracting it from the total amount you do have. This will help avoid overdraft fees that can metaphorically kill you.

DO NOT TURN TO BANKRUPTCY.

Whatever you do, avoid bankruptcy. Bankruptcy stays on your credit report for ten years. It's a negative, life-altering event that will cause embarrassment and lifelong damage. When there is a bankruptcy on your file, this makes obtaining future loans and even high-paying jobs severely difficult. If you do, in fact, lie in the future on a loan application that you have never had a bankruptcy filed, you are actually committing criminal fraud.

TACKLE THE SMALLEST MONSTER FIRST.

Most people believe that if you're in debt, it's best to take care of the highest debt first. This is not necessarily true. Do this: List your debts from smallest to largest, and when you do this, don't even worry about the interest rates, just what you owe. You should pay off your smallest debt first to help get into the routine of eliminating debts from your life. If you have a college loan of $5,000, and a credit card debt of $325.90 in jewelry , pay the jewelry off first. That will be one less thing that you have to worry about. It's a mental thing. The faster you start to see results, the more confident you will feel as you try to lower your debt amount. In my personal experience, when I tried to focus on my highest debt, which was my college one, I felt as if I wasn't making a dent, and felt extremely discouraged, and even gave up a few times. Make minimum payments on everything else, but attack that smallest debt with all your strength.

BEGIN EATING ON A HAMBURGER BUDGET INSTEAD OF A CAVIAR BUDGET.

Yes, it's nice to have the designer purses from Coach that cost nearly two hundred dollars. Of course, I would love to dine at the Tower of the Americas here in San Antonio, instead of McDonald's. Who wouldn't? Having dinner while suspended in the air on a rotating disk while drinking an overpriced Martini with a loved one over the finest steak around sounds appealing. But if you can't afford this kind of dinner, don't try. In fact, you should buy your groceries every two weeks instead of going out to eat. Plan meals in advance, and buy accordingly. Avoid buying last minute items that you do not need while you're at the grocery store. Instead of frequenting the mall for clothes, go to the clearance rack at Wal-Mart. If you have a family, make a pact to not frequent the mall. If you have to go out and do something, have a picnic at the park. Do an outdoor activity as a family unit that does not involve money. You may be thinking at this point that living like this will make you feel poor. You don't want to feel like you're poor, I understand this. But the only way to have money in order to pay off your debts is to stop spending money in useless ways. I know that when I used to go to Starbucks frequently, I was aware that the eight dollars I just spent could have easily gone toward my Military Star Card payment. I couldn't enjoy my drink when thoughts like this were weighing in my head. It made more sense to make coffee at home for practically free than to spend money on the same thing somewhere else.

SELL EVERYTHING YOU DO NOT ABSOLUTELY NEED.

If you have a huge television, many game consoles that no one ever uses, an extra car that is only in the parking garage as a commodity, SELL IT. You can sell your items through the newspaper, or by word of mouth. You can also choose to sell your items on the Internet as well, but that can involve a fee. On Ebay, if you learn how to sell your items and regain the money you spent on the bid fees back, it could be a good investment. Before you take this route, make sure that the item you're trying to sell is in good condition, in relatively high demand, and make sure that you know exactly what you're doing. If you just bought a new car, sell it, and buy an old one that you can afford. That new car will give you more problems than the appearance of it is worth. You need something that will get you from point A to point B. Keep your family in mind, keep your finances in mind, and your peace of mind as well. You don't need that expensive car. Even if you live in a three bathroom, four bedroom home, ask yourself...do I really need this? Can I get a smaller home and still provide the needs for my family?

CREATE AN EMERGENCY FUND.

Creating an emergency fund probably doesn't make sense, since what you are trying to do is pay off your debts. The last thing you want to do is put money toward anything else that isn't your debt. But if you create an emergency fund that is at least one thousand dollars, it would come in handy if something unexpected was to happen. A fully funded emergency fund equates to 3-6 months of your personal expenses set aside in a savings or money market account. This is NOT an investment for your little Adventures in Paris dream. This is strictly for emergencies.

DON'T BE DISCOURAGED. DON'T GIVE UP.

Giving up on reducing your debt is one of the biggest mistakes you could make. Reducing your debt is a hard, but very worthwhile journey. Nothing that is worth it comes easy in life. Remember to tackle your debts one at a time. Involve your family. Gradually create an emergency fund. Question everything you own. Do you really need it? Can you downsize? Can your daughter live without that Louis Vuitton purse? Every time you spend a cent, make a mental note as to where it's going and for what purpose. Ask yourself...would I rather have this money in my savings account....or lost in a cup of overpriced coffee? In the end, getting yourself out of debt is part strategy and part mental. Be strong and keep pressing forward. Someday, you'll look at your growing savings account, and your debts will just be a ghost of the past. And then, only then, will you realize that all the savings and hardships that are involved with debt-reducing were worth every penny.