Debt is destructive. Not just to your finances, but it can also damage relationships as well as your health. Stress is not healthy and financial stress can be the worst. Unfortunately it’s a stress that almost all of us endure, but why? Here are some ways to deal with and avoid debt.
One of the biggest failings the education system has is that it doesn’t prepare young people for the real world. The system is archaic in nature and has not evolved with the times. As a result, we leave school with an A in History but a F- in money and finances. Even Accountancy that’s taught at schools doesn’t teach you Money Management, it just teaches you how to record transactions.
Resultantly, we enter into the world and proceed to be lured by all the shiny things; we start making some money and before you know it, you’re spending more than you make and the debt trap has you. And it’s a very hard trap to free yourself from. Trust me, I’ve been there.
Chances are if you’re reading this, you’ve already fallen into the trap. Don’t beat yourself up about it, it happens to the best of us 😉 Dust yourself off and rather look forward. How are you going to beat this thing, how are you going to take back control?
Accept responsibility for where you are and then move on. We can’t change the past, it’s happened. The true test is how we move forward and tackle the future. The best thing you can do is let go of what’s happened – remember that the energy you put out is the energy that you’ll attract, and if you’re focussing on the past, you’ll get more of what happened (i.e. what you don’t want). What DO YOU want? To be DEBT FREE.
Spoiler alert – I do believe that the Law Of Attraction works 🙂
Right, now that the life lesson is over, let’s look at what can be done.
1. STOP getting into MORE debt
Cut up your credit cards – this includes removing them from your devices (e.g. Apple Pay etc.). This goes for store cards and the like. Any card that allows you to spend money that isn’t yours – bin it!
If you really need to keep one available for emergencies (however, see point 3 below), then put it in a small tupperware, fill it with water and put it in the freezer. This will discourage any frivolous spending if you have a moment of weakness.
Trying to rid yourself of debt is almost impossible if you keep on incurring more. It’s like taking one step forward and two steps back. Don’t sabotage yourself – you’re worth more.
2. Don’t buy it unless you can pay cash
If you need anything, make sure you can afford it with cash. Otherwise you don’t need it. You need to get to a point where your earnings cover your lifestyle. Living beyond your means is a recipe for disaster and is unsustainable.
Home emergencies and the like should be covered by insurances.
The only caveat here is your house; a mortgage is the only acceptable debt to take on. However, if you’re really in a position where you are struggling to make ends meet, then it may be time to downsize. Or possibly sell and rent somewhere while using the equity you’ve released to settle your debts.
Additionally; if you’re one who uses certain cards for their benefits (air miles and the like), then make sure whatever you spend on your card, you can pay down in FULL each month. This way you can earn your points, but not incur additional debt.
3. Build up an emergency fund
Put aside some money and try and add to it each month. The ideal amount is to end up with 6 months worth of living costs stashed away to take care of any unforeseen eventualities; loss of earnings, urgent expenses.
This way you won’t need to rely on credit cards to bail you out of a sticky situation.
4. Track your net worth
Keeping an eye on your financial position is very powerful. The first time you do it, particularly if you’re in debt and trying to get out of it, can be a very sobering exercise. However, once you start and you watch your net worth grow each month as you pay down your debt.
List all your assets and the amounts they’re worth.
List all your investments, cash balances.
List all your debts, including mortgages.
You should either be in a positive or negative position. Negative means a net debt position and this whole task needs to be taken very seriously. Do this every month and as you track this you should see your net worth increasing – this can be addictive enough to make you change your ways!
5. Overhaul Your Mindset
Why are you spending on credit? Why are you buying things that you cannot afford?
Ask yourself the following questions when you feel tempted to spend on credit. Be honest with yourself.
- Do I need this?
- WHY do I need this?
- Is this a necessity or a luxury?
- Am I getting short term pleasure from this or will it benefit me in the future too?
Understanding why you’re spending on credit is important as that’s the source of the issue. If you can understand and resolve the issues that are getting you into debt in the first place, you can put a stop to letting the problem grow.
Keeping Up With The Jones’ is a real thing. But at the end of the day, how others perceive you is irrelevant. How YOU feel is far more important. Being happy, debt free and loving every moment of life is far more valuable than having the shiny things, but having the constant anxiety and stress related to debt and interest payments.
To me, peace of mind is worth more than the image you portray to others.
BONUS TIP 6: Destroy your existing debt
What about tackling the existing debt? Have a look at our article here.
Wishing you all the best.