How do you get out of debt?  How do you escape the stress, worry and uncertainty caused by owing your paychecks to others? You can do just that – get out of debt, but it’s not a simple fix.  If you’re like most, it took a long time – years and maybe ev decades – to sink so deeply into debt. 

And, it will take time to climb out.

Climbing out may seem as simple as earning more or spding less.  In reality, it’s not that simple.  Freeing yourself from debt requires channg attitudes, habits and lifestyles.  Your relationship with money (and things obtained with it) formed your habits and lifestyle choices that cause you to spd your money before you actually earned it.  The bad news – it can be a long and uncomfortable process.  The good news – people do it every day and you can too—using the suggestions offered here.

Characteristics of Debt:  Owing money is nothing new.  Recorded debt systems date back to at least 3,500BC.  However, the depth into which the American consumer (and governmt) has sunk into debt in rect history is unprecedted.  As my regular readers may recall, in my earlier column, Sixteen Tons of Debt, I discussed the increasing debt of American consumers since 1980 and compared it to the scrip-system faced by early-20th ctury miners.  The characteristics are:

Free Yourself From Debt: Although there is no simple way out, it is possible.  Like any worthwhile project, knowledge is crucial.  The knowledge required here is self- knowledge – facing the habits and beliefs that created your debt in the first place. 

Knowing Thyself and Thy Reality requires a serious and honest look at your beliefs and attitudes toward stuff and money.  It also requires you to understand your financial limits: how much money you realistically have to spd. 

Debt Formula:  The formula for creating debt is simple and similar to the formula for gaining weight.  Habitually consume more calories than your will burn and you will gain weight.  It’s simple, yet as anyone who has attempted to lose weight knows, it’s easier s than done.  Losing weight requires reducing the amount of calories consumed andor burning more calories through exercise.  Similarly, spd more money than you actually have and you will go into debt.  Getting out of debt requires reducing one’s consumption of stuff andor increasing ones income. 

Caution: There is one caution, however, with regard to income’s importance in this formula.  Whereas exercise is good for the , ving more income to someone who has a debtor-relationship to money may not be beficial, because it oft becomes the justification for obtaining more debt.

Lifestyle Challge:  Why is it so difficult to change the debt formula in our lives?  Because it requires channg our lifestyles – channg the very way we live from day-to-day.  Channg your feelings and associations with stuff and money is esstial to freeing yourself from debt and and requires: (1) A serious waking-up to the financial reality your lifestyle choices have created, and (2) A commitmt to channg this lifestyle.  To face this reality and commit yourself to change, take the following steps:

Step One: Beware of the Bandwagon:  The Bandwagon Effect occurs wh individuals believe, do, or buy something solely because others do.  The bandwagon (and its close cousin, the testimonial) effect works by either twisting your emotional need to socially conform (or to socially compete) or by manipulating your vious heart-strings to buy what others have – that you don’t really need.   

Just because a neighbor or colleague put in a swimming pool, got a new car, diamond ring, boat, RV, … does not mean you need one too.  Wh you feel you need to have something simply because someone else has it or because it is some sort of status symbol, take a breath, regroup and ask yourself:  What purpose will the item serve?  You might want the thing they have, but you don’t need their paymt.

Step Two: Know the Marketer’s Motive:  Advertising exists with one ultimate goal – to get you to buy things which you oft do not need and may not be able to afford.

To protect your wallet be aware of the fact, that on an average day, you will be bomded by somewhere betwe 2,000 – 5,000 commercial messages seeking to convince you that you need the item each sells.  Your best defse is to know the differce betwe your needs and your wants. 

Step Three: Separate Needs from Wants:  This, for most, will be the most difficult and important step necessary to stop sinking further into debt.  Why? Two reasons:
First, each commercial message you hear, see, touch or smell has had one ultimate goal – to get you to buy something.  And the easiest way to get you to buy their thing is to make you think you need it.  Needs are necessities you cannot do without such as basic clothing, food and shelter.  Needs must be obtained.  Wants, on the other hand, are things you can save for, or simply do without. 

The second reason that differtiating betwe our wants and needs is so difficult is more culturally-based, and more troubling:  It is difficult to pinpoint exactly wh it happed, but at some point along the way the reward of pride-gerating struggle and self-reliance slowly gave way to convice, leisure, and tertainmt. 

Over time, as the work-world changed from a production to service-based economy, appreciation for hard-earned necessities was slowly replaced by a commercially-driv sse of titlemt.  It is this sse of titlemt that makes it difficult to differtiate betwe needs and wants, betwe necessities and luxuries.  titlemt makes us feel like we deserve (need) something ev though we have not yet earned the money to pay for it.  It is the fuel advertisers and creditors mix with credit to lure us into debt – “You can have it now; after all you deserve it.” 

To stop sinking deeper into debt you must face the reality of need verses want.  Here’s how to look at it: 

Need: A need is a necessity.  It is basic food, shelter, clothing, and transportation.  That is it.  It is canned tuna fish, not grilled salmon; an apartmt or small home that keeps you and your family safe, not your brother-in-laws mc-mansion; it is off the rack, not designer clothes.  It is public transportation, if available, or a p-for car that consisttly gets you from point A to Point B.  It is also to some minimum level of basic health care.

Wants:  Wants are everything that is not a need.  These are luxuries –lifestyle items: a lifestyle you must be willing to change or sink further into debt.  Chances are, it includes many items we have be taught to believe are absolute necessities.  For instance, no one needs a $175 monthly bill for premium cable.  The same is true for cell phones – we’ll never know which commercial tipped the scale and made the $150 per month family plan an absolute necessity, but it’s important that we wake up to the reality that the sky will not fall without them.  A car may be a necessity for many of us.  However, the average $400+ per month paymt is not.   

This is not to say you must get rid of any or all of these luxuries.  But, you must be able to discern them from items you actually need.  You must also be willing to put them on the table if you wish to become financially free.  Cable and cell phone fees alone cost the average, debt-ridd family, nearly $4,000 s per year.  Add one average car paymt, and its closer to $9,000.  Simply working to cut these costs in half could change your tire financial outlook!

Step Four: “No” Thyself:  Understand that the ability to delay gratification, to ve up something now for a larger reward later, is a major sign of maturity.  titlemt and delayed gratification, however, are at polar opposites on the maturity scale.  The phrase; “NO,” is largely unfamiliar to those who are titled, in-debt, and unable separate their needs from their wants.  Once you have committed to stop getting yourself further into debt and recognized the differce betwe needs and wants, learn to just say “NO”.  Practice saying “No.”  “No” yourself in the shopping malls, convice stores and rooms. 

Step Five: Understand How Costs Add Up:  Just as pnies become s, s quickly add up to hundreds of s.  For example, that $2.50 cappuccino (or whatever) you buy on the way to work each day will cost you over $600 this year.  Spding $30 each Friday ordering pizza will cost you over $1,500 annually.  Where your pnies go, your s follow.  Become conscious of where you leave your pnies each day, week, and month, and do the math; you will simply be astounded.  With a little self-discipline, it is possible to start reducing your debt.

Step Six: Look at the Price, Not the Paymt:  Why do individuals become slaves to debt in modern times?  The vast majority of us have willfully chos our debt life-style because we look at the monthly paymt instead of the item’s true cost.  As soon as we agree to the paymt, we ve up that portion of our income until the debt is p

Interest makes the price higher and worse yet, wh you need that money –wh you get l off, have an accidt, or need to repair the air conditioner – you will not have it.  Wh financial problems arise, the financially-strapped have little choice but to sink deeper into debt. 

Step Sev:  Get the Team on Board: The first six steps involved facing your personal relationship with money, debt, and things.  Step sev, however, involves your partner and family.  It is esstial that all are on the same page wh it comes to channg the lifestyle that has you in debt.  It is oft s that money is a major cause of domestic friction.  Therefore, it is important to get on the same page. 
Knowing yourself and your money relationship is esstial to freeing yourself from debt.  Now that you have examined your relationship with money and made a commitmt to change, you are ready to start the actually process of freeing yourself from debt.  This process will the topic of our next column.

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