“I Have Way Too Much Debt!!”

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This is a statement that I hear quite a bit as a financial educator. A lot of people really feel like it’s impossible to save money, impossible to get ahead financially, and impossible to do the things they really want; like go on vacation out of the country, because their debt is overwhelming. And I completely agree with them. Look at what’s happening out there in our country:

Americans are living paycheck to paycheck.  (This was reported in the federal reserve report https://www.federalreserve.gov/econresdata/2014-report-economic-well-being-us-households-201505.pdf)

People are struggling to cover a $400 emergency. (See link in previous stat)

Americans don’t have enough money saved for retirement. (http://www.cnbc.com/2016/09/12/heres-how-much-the-average-american-family-has-saved-for-retirement.html)

With these issues surrounding us daily it can really seem like the world is against us and we can’t get ahead. However I teach people about the real issues at hand. Yes, having no emergency savings is bad, and Yes, living paycheck to paycheck is bad; but these are just symptoms, not the root cause. The root of all these problems is the lack of discipline with the dollar bill. Debt is accumulated because people are purchasing things with money that they don’t have. There are moments when credit cards and personal loans may help in the event of an emergency, but from my personal experience in speaking with families and individuals looking to get ahead financially, the root cause of their debt was poor decision making. To be more specific, they used credit cards and other lines of credit when it wasn’t really necessary.

You may be thinking, “okay but how can I get out of this then?” Here a some key steps that I’ve implemented into my own life and my clients lives as well.

  • Print out 3 months of your bank statements and highlight all of the transactions revolving around food & entertainment. This is pretty enlightening for people because they can see how much money is actually being spent on things that aren’t mandatory.
  • Make a commitment to live in CASH only. Only buy things with money that you physically have.
  • Sprint to $1000 in emergency savings ASAP. This is the perfect time of year, especially with tax returns coming, use a piece of it to help catapult you to financial stability.
  • Pay your debts!! Don’t ignore those calls from creditors! Pick up the phone and make an arrangement, let them know what you’re going through.
  • Create a budget. Have a working document of all your mandatory expenses, and things you would like to do, along with your desired savings. If you need help with this, let me know! I have a template that I can share with you.

Those are some good first steps to getting out of debt. The most important thing you can do is be consistent and patient. Debt doesn’t pile up overnight, so it won’t go away in a jiffy neither. Hopefully this information is useful to you and people that you know. Please let me know what you’d like me to cover next!

Until next time…Au Revoir!

KS

 

 


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