How To Stay Out of Debt

by RJ

in Money Management

4049162267_ccb3b228b3I didn’t realize the secret of how to stay out of debt can be applied to other areas of our lives. Here’s a quick story to illustrate my point.

I was talking to my wife the other day, who is a registered dietitian and the brains behind our marriage, about how many Nutella crapes and other delicious deserts I managed to eat during this past holiday season. She wasn’t as impressed as I was.

She later hit upon an interesting concept during this same conversation that made a lot of sense for my financial brain.

She was discussing how the average person gains weight. She explained,

“They gain ten pounds over the holidays. Followed by loosing eight after January 1st.

Next December, they again gain ten pounds. They make the same resolution and loose only eight. Now a net gain of four pounds over two years.

Over one or two years, it doesn’t make much of a difference. However, over 20 years that’s 40 pounds!”

I couldn’t help but think of the similarities between how people get into debt and how people gain weight.

Debt usually starts somewhere in your 20′s. You get your first credit card, with a small limit. You tell yourself you’re only going to put groceries on your card and pay it off each month.

However, at the end of the month, there is a small balance on there. Unfortunately, you don’t have the money to pay the entire card off.

The balance keeps growing little by little each month. There are a few times when you get motivation to finally pay if off, but life happens and you can never pay the entire balance.

Just like with the gaining weight, it takes a few years to actually see the magnitude of the problem you have on hand.

What began as a simple credit card with a small limit has sprung into three maxed out credit cards, student loan debt, and car payments all while you’re living paycheck to paycheck.

How To Stay Out of Debt

The answer is pretty simple if you want to overcome debt, don’t let yourself get into debt in the first place.

If you’re already in debt, realize the problem and promise to change things.

Do you agree or disagree?

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JoelNo Gravatar January 6, 2010 at 10:54 am

A few years ago, my wife was several thousand dollars in debt. She resolved to get her act together, and she simply put her credit cards away. She paid down her balances, started cooking at home, and only spent what was available via her debit card.

Voila: She’s now debt-free, with an absurdly high credit rating. It wasn’t fun, but it can be done. (Hey, that rhymes!)
.-= Joel´s last blog ..New Year’s Resolutions: 10 Steps to Get Your Financial Life in Order =-.

GeorgeNo Gravatar January 6, 2010 at 4:02 pm

That’s a great point. I see so many parallels between our health and our finances. Firstly, dieting doesn’t work. But nearly everyone (or at least every woman) does it. Dieting alone is something that seems to work in the short term, but always fails in the long term. I think it feeds people’s desire to punish themselves, rather than being a bona fide strategy to health success.

Another link is self control. People are in debt because they did not control their finances. When our bodies are not the way we want them to be, the reason is the same: lack of self control. We eat and drink what we want, and not what serves us the most.

So, what’s the solution? I think a new approach is needed. Instead of focusing on depriving ourselves (by dieting or saving), I think it is better focus on rewarding ourselves for increasing our resources. Instead of saving $4 on a latte, invest $14 on a book. Then read the book while drinking the latte. Find ways to generate money. Instead of skipping the ice cream, find a method of exercise that we enjoy. Then, have the ice cream.

This sort of strategy actually works. It has worked for me and it makes sense.
.-= George´s last blog ..How to Prepare for the Wealth Singularity =-.

Ms. FreemanNo Gravatar January 7, 2010 at 8:21 am

I agree, I am learning late in life that you never can really pay your way out of debt in installments. You really need to blast it with large lump sums.
.-= Ms. Freeman´s last blog ..Ode to Akismet =-.

CraigNo Gravatar January 7, 2010 at 11:12 am

Have control and make sure you limit what you spend and really do pay off in full each month or else you will get into trouble.
.-= Craig´s last blog ..Weekly Personal Finance Twitter Chat: Unemployment =-.

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