Financial denial. Yep. That’s what many of us live in, but ironically that is what many of us should plunge towards. Financial denial can mean two things:
A) I (and possibly my significant other) are in denial about how poorly we manage our finances.Financial denial. Yep. That’s what many of us live in, but ironically that is what many of us should plunge towards. Financial denial can mean two things:
B) I will deny my wants and desires today, so I can better serve myself in the future.
They are two denials at odds with each other, and if you can grasp hold of A then B seemingly falls into place.
Let me explain.
For many years I paid my bills (when I could) and refused to look at the total of what I owed–too scary, and too hard. Every month, I would pay the minimum balance on credit car payments when it was possible (I had a lot of debt) feeling relieved that this chore was over. However, I knew that I really hadn’t done much but kept this paperwork off my desk for another month. So what changed? I added up all I owed, face reality, and figured out how long it would take to pay it off with minimum payments. I was going to harnessed and indentured to these payments for the next two decades at least!
Money is a terrible master but an excellent servant. –P.T. Barnum American Circus Entertainer
Bankrate offers a calculator to figure out how long it will take to pay off your credit cards with minimum payments.
Twenty years is too long. I paid off my credit cards in less than two years. This is how I did it.
Ten Steps to Begin Taking Back Your Financial Freedom
- I cut them up. I cut up all of my credit cards–I didn’t close the accounts at this point however, closing too many accounts at once can hurt your FICO score. I slowly closed them one by one over time.
- I wrote down everything I bought and paid for. Everything! I wrote it down in a small notebook I carried in my purse. This helped me see where the money was being syphoned out. Much of they syphoning was quick and wasteful. At the end of each month I categorized my expenses and added up each category. That act alone is the most eye-opening to how money can be quickly wasted. I plugged those holes and slowed my spending. For more information about categorizing debt read and really making your money work for you read Your Money or Your Life by Joe Dominguez and Vicki Robin.
- Writing down everything in itself slowed down my spending because I’m lazy. Do I want to write down the dollar I used in the vending machine? Nope. Skip it. That act alone saved me plenty.
- I took ALL the extra money I saved each month from my plugged holes and paid it towards my smallest debt and created the snowball effect a la Dave Ramsey. http://www.daveramsey.com/new/baby-step-2/
- I skipped eating out, new clothes, unneeded extras, and payed it towards debt. More holes were plugged!
- I got a second job. That money went solely towards my debt and kept me from spending money in my free time.
- If I got a lump sum–tax returns, a small cash gift, a bonus–it all went towards my debt.
- I read everything I could about debt, saving, and finance. These authors supported a debt free lifestyle and were my coaches/cheerleaders when others laughed at my homemade lunches, thrift store purchases, and other quirky money saving measures. My best cheerleaders were found in the voices of the The Tightwad Gazette community.
- I realized this wasn’t forever. When my debt was paid off I was able to ease up on my saving and spend some of my money for things I truly enjoyed. However, I had changed over time and senseless spending just didn’t work for me anymore. I am my money’s master and that is a terrific feeling.
- I had gratitude for the opportunity to get right financially. In history past debt could mean a sad and desperate situation for a debtor. Today, however I was able to take control and make things right with the companies I owed money to.
I hope in the early months of this new year, you find yourself working towards making money your servant rather than your master!