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Debt-Free
Boot Camp - Part I: Tell Yourself the
Truth���� 1
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If
you have debts, then take an honest look at what
price you are paying for the debt.� Put down
each of your outstanding debts on a piece of
paper on one column.� Then, on the next column, put
your annual interest rate for each one of those
debts.� On the next column, divide the interest
rate by 12, and then write that number down.� On
the final column, multiply the outstanding balance for
that month (in the first column) by the figure in the
third column.��
Then, focus on intangible
costs.� For example, write down how many times
you have had an argument in the last month over money.
Write down lost opportunities to give.� Add to the
list what bargains that you wanted in the last month,
but couldn't get because of debts.
Your table should look
something like this:
| ACTUAL
MONEY COSTS PER MONTH |
|
Debt |
Oustanding
Balance |
Annual
Interest Rate |
Annual
Rate� /12 |
Interest
to be paid this month. |
| Visa |
$4,000 |
14% |
1.167% |
$66.80 |
| MasterCard |
$2,000 |
12% |
1
% |
$20.00 |
| Foley's |
$1,500 |
16% |
1.33% |
$19.95 |
| Auto
Loan 1 |
$14,000 |
9% |
.75% |
$105.00 |
| Auto
Loan 2 |
$7,000 |
8% |
.67% |
$46.90 |
| Mortgage |
$90,000 |
7.5% |
.625% |
$562.50 |
| TOTAL
ACTUAL INTEREST COSTS (THAT GO DOWN THE DRAIN)
THIS MONTH |
$821.15 |
| INTANGIBLE
COSTS PER MONTH |
| Number
of Arguments Last Month about Money |
4 |
| Number
of Missed Bargains Last Month |
2 |
| Number
of Times You Wanted to Give, But Couldn't (Last
Month) |
2 |
| Other |
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What
is yours looking like?� Is it even higher than
this?� Well, it gets worse.� Every amount in
this column, except for mortgage debt, can not be
deducted from your taxes.� What that means to you
is that you are paying for this debt with after-tax
money!� This mans that if you are paying a 28% tax
rate, you are having to make approximately $1,140
gross every month just to pay for this
debt.� So, who are you really working for...your
bank or yourself?
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The
Truth Hurts...But Only For a While
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Hopefully,
you did your "homework" above.� If you
did, you will see that having a high amount of debt makes
you a slave of your debtors.� You are working
for your debtors...and it is controlling so many crucial
decisions.
If you are feeling
nervous, then take heart...you are starting to see the
ugly truth about debt!� Only then can you see begin
to make changes in patterns of spending...and even in
how you think about money in general!� The good
news is that once a decision is made to change habits,
things can change much more quickly than you might
realize.
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The
Truth Also Heals |
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Now,
let's get to the heart of the matter.� We have
not learned how to manage our money!� Let's
list some more truths...more positive this time!:
- We Must Decide to
Live a Totally Debt-Free Life - As we said
before, living with debt does not have to be the
norm for us.� There are a growing number of
people who are choosing to be totally
debt-free.� This doesn't mean that they are now
currently this way, but they are moving rapidly
towards it!� You can too!
- We Must Cut Our
Spending Levels- This is the main point of this
entire article!� We can continue to try to
get credit counseling, move money around to new
credit cards, etc., but until we decide that we
will control your own spending, we will continue
to be a slave to other people.�� Instead,
we should be focusing on cutting our expenses in
every way possible.� (See www.thefrugallife.com
for some excellent hints on that.)� We
should be becoming lean and mean, financially!
- We Must Take
Responsibility for Our Finances - We can't
continue to give control of our financial affairs
over to others, such as financial planners, credit
counselors, accountants, etc.� This doesn't
mean that these people shouldn't be involved...the
opposite is true!� However, you should look at
these people as resources who can help YOU make
decisions on financial matters.� But, in the
final analysis, you are the final decision
maker!����
- We Must Learn the
Concept of Delayed Gratification - Our society
has taught us that we must have everything...and we
must have it right now.� This can sound
"liberating", but this idea has led to
higher and higher levels of debt.� We buy the
newest cars...when a used one would still do the
job.� We buy a 5 bedroom house...when we only
really need a much smaller 3 or 4 bedroom
house.� We wear the "right"
accessories, clothes, etc...when we could find some
excellent deals for much less without the brand
name.�� We take a yearly cruise...while
our children may be going to a dangerous
school.� And, let's face it...many times we
do it for pride...to impress!� Instead, we
should learn to save and do without for a while...and
let our money grow!� We will find that we will
have more later totally paid for...and learn that
these physical things maybe weren't that important
to begin with!
- We Must Begin
Saving a Part of Every Paycheck We Get -��
To sum it up, we should cut our expenses enough to
be saving money each month...preferably at least
10%.� We will cover more on this in a later
article.�
- We Must Learn to be
GIVERS - There is a strange correlation between
generosity and financial well-being.� It is
unexplainable, but it is true.� This will also
be covered in a later article.
Wrap-Up
When
we begin to realize the entire truth (both good and bad)
about debt, we are on our way to making the journey into
being financially sound.� The process is simply,
but not easy.� Follow us along as we talk more
about it in this continuing series!� And feel free
to write us
about this most important topic!� � |
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