One of the keys to success in these challenging financial times is our ability to manage debt – our personal debt. Indeed, even though the latest unemployment numbers are among the primary metrics currently used to evaluate the so-called health of our economy; even though we hear a lot, particularly in this election year, about national debt; even though most of our politicians and a large number of us have forgotten that in 2000, the U.S. was actually operating with a very substantial surplus rather than a deficit; the bottom line is that many of us are encumbered by personal debt and this debt greatly and negatively impacts our ability to live consciously and age wisely.
We could, of course, spend a lot of time conjecturing on why the news media does not spend much, if any, time reporting on the size of personal debt in America. We could discuss the fact that debt is, after all, a form of economic slavery and we could speculate on why anyone would want others to live their lives in this kind of servitude. We could also bemoan the fact that debt is big business in America. Very big business! In fact, now that America does not make very many products anymore, the accumulation and processing of debt and the various forms of legalized gambling that most banks and investment firms engage in with our money now rank among our largest industries.
Finally, of course, we could spend time admitting that shopping has replaced baseball as the great American pastime and that the majority of us are actually addicted to it and would be at a loss as to what to do with all of that spare time if we went on ‘mall diets.’
Yes, important topics, one and all, and while exploring them would be interesting and even valuable, the bottom line is that unless you and I actually start doing some things today to begin tackling our personal debt, our individual lives are not going to improve very much. Indeed, on the day we really pay attention to reducing our personal debt we will go a long way to regaining control over our own lives, freeing ourselves from economic servitude and setting the stage for some of the larger national and global changes that need to occur. In short, the day we begin to solve our personal debt dilemma is the day we will begin a genuine lifestyle revolution that will usher in a period of greater sanity, sustainability and individual and national success.
So here are eight practical and achievable steps we can all take starting today to reduce our personal debt and regain our freedom.
1. Identify – There is an old Chinese saying that suggests that the ‘journey of a thousand miles begins beneath your feet.’ So when it comes to personal debt the first and most important stop any of us can take is to identify the amount of personal debt we have. This means making a list and checking it twice. So get out your monthly credit card statements and add up the interest and principle payments you make on your home, your car, on any long term medical bills, student loans and any other major purchases you have made that involve debt. You will also want to consider personal loans that still outstanding with family members or friends even if you are not currently paying them down.
We know, this isn’t easy to do and sometimes it is downright intimidating, but the truth is, without knowing how much debt we have we cannot begin to do anything constructive about managing and reducing it.
2. Reduce – Once you get over the shock of how much personal debt you may have, the next and most important step you can take is to identify your income. As we all know, and often pretend that we don’t, there really is a direct relationship between the amount of income we have, the amount we spend and the amount of debt we accumulate. So if your outflow is greater than your inflow, it is probably a very good time to go on a ‘debt diet.” This means stop using your credit cards to make purchases except those that are absolutely essential. And that includes avoiding any and all of those impossible to believe deals that offer you no interest payments until 3010. Remember, there is no such thing as a free lunch and when the piper eventually calls, it will not be a pleasant day.
3. Combine - As you know different credit cards have different rates of interest. So a smart and practical thing you can do is to compare the interest rates your credit card companies are charging you. Once you identify the card with the lowest rate, use that card or a home or business equity line of credit that has a lower rate of interest than your highest interest credit card to pay off the balance on that card. You may also have the option of getting a personal loan from a family member or a friend that you can pay back at a significantly lower interest rate rather than the outlandish amount you are currently being charged by your credit card company. In this way you may not yet be able to pay down the principle that you owe, but you can certainly lower and eventually reduce the enormous burden that some credit card companies place on you. And in this way you can begin to solve your debt dilemma.
4. Differentiate – Not all debt is bad. Without access to capital in the form savings, loans and lines of credit few of us could start or grow a business, invest in our own or our children’s education, buy a home, begin to build an investment portfolio and much more. So another important step you can take in reducing your personal debt is to pay attention to is the difference between debt that helps you build your future and debt that results from purchasing more consumables and accumulating more material possessions. The former helps you prepare for the future, the later only satisfies temporary desires.
5. Engage – Although credit card companies, especially those that charge what amount to usury rates, do not force you to use their cards or to buy all of the things that you do, they certainly make it easy for you to accumulate debt – at least in the beginning. So another thing you may want to do is to get more involved with your local, state and Federal government representatives and encourage them to do something, something soon and something constructive, about many of the unacceptable and unconscionable fees and rates charged by most credit card companies.
6. Experiment – It may also be time for you to investigate other job or career opportunities. And yes, we know it’s not easy out there right now, but for those who are willing to experiment with new options, learn new skills, investigate other job possibilities, there may be a way to improve the income side of your balance sheet – both short and long term – and with more money coming in and better spending habits you can begin paying down your debt and, of equal importance, start saving some money for the future.
7. Learn – We live in a fast paced and pretty complicated world. So it is essential that each of us understand our rights and our responsibilities. Clearly, no matter what all of those ads about reducing credit card debt suggest, there are no free rides or simple formulae that can make our debts magically disappear. If we use credit to buy things – particularly things that are not essential – then it is our obligation to pay what we owe. It is not, however, our obligation to get taken for a ride. So know what you are getting into before you buy something and, in event, you have been taken advantage of, know your rights, know where you can go in your city or town or in your state and Federal Government to get relief.
8. Redefine – If you really want to reduce your personal debt, you might want to take a long and clear look at the values and priorities that you hold and the habits that make up the daily fabric of your life. The quickest way out of the debt conundrum is to start paying close attention to what really gives you joy and what allows you to experience genuine connection in your relationships and greater meaning and purpose in your life. I sincerely doubt that you will find many of those things in your local mall. In fact, as the cliché reminds us – the best things in life really are free.