Debt is enslaving America. It is killing our citizens, our cities and our country by draining away their hard won gains. It is a drain on our families and it creates fragility in our lives. The more debt we assume the less resilience we have to overcome random disasters. Debt is insidious because we justify taking it on to get the things that we believe we need and are entitled to. A good education, a nicer car, a biggerl home, fun technology, exciting vacations, … the perfect life right? Sometimes we even take on debt for a seemingly good reason, for example buying prepping supplies in order to become more self reliant. Things like extra food, a home in the country, building a greenhouse or a chicken coop, buying a generator or chain saw. All good stuff right?
WRONG! The resilient life is one free from the slavery that we place ourselves into when we take on debt that grows ever larger year by year. A resilient life is one that can flex like a willow during the storms that disrupt everyones life. Things like the loss of a job, a car breakdown, a storm causing damage to your home are all things that we need to be able to be able to deal with WITHOUT pulling out the Visa card. Without debt, and with an emergency cash reserve, we can weather the storms of life. With debt, a flat tire, unexpected medical bill, broken appliance or an emergency needing to visit distant family becomes one more reason to use the credit card and our debt increases.
The average student leaves college with over $25,000 in debt, some with 2-3 times that amount. The average Personal Debt for every U.S. citizen is currently over $50,400! That makes the debt for the average household with 2 adults and 2 children over $201,600! People, this is not sustainable and it means that we are living in a terribly fragile world where our population is living today on tomorrows potential earnings.
So what can you do? GET OUT OF DEBT! Step one is to stop putting additional debt on your credit cards. If you can’t bear to cut them up as least take them out of your wallet or purse and lock them away. In other words, when you find yourself deep in a hole STOP DIGGING! Next you must put aside $1,000 in a cash emergency fund. That way if the water pump on the car needs replacing you don’t immediately have to whip out the plastic. Once you spend some or all of your emergency fund you need to immediatley work on replacing it.
Once you are living without plastic and don’t dread the inevitable emergency expense you need to start paying off your debts. Make a list of every credit card you have, the balance due, the minimum payment and when that payment is due. Sort them with the smallest debt at the top of the list. This might be a $50 dentist co-pay. then sort the rest in increasing total balance due with the largest at the bottom. This might be a student load or car payment. The point is to pay the minimum payment on EVERY loan so that you don’t get hit with massive late payment fees. Then take every cent you have left over, after covering your monthly utilities and food, and pay on the smallest debt. In just a few weeks or a month you will have paid it off! Relish in that feeling! Don’t you feel less stress… OK… a little less anyway?
Once you pay off the smallest debt use the money you were paying the minimum payment to pay off the next largest. Then use both to pay off the third. Then all three minimums to pay off the fourth. Get the idea? This is called the Debt Snowball.
For more information on this plan get the book The Total Money Makeover by Dave Ramsey. It will change the way you look at money and more importantly, your debt.