Day 2: Make A Resolution to “Stop Digging” (Part 3)

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Wage War on Your Debt

You’ve heard of “Cease Fire” agreements when nations are at war, right? Well, right now consider yourself at war with your debt. It’s a battle you’ll win if you start off with a “take no prisoners” attitude. And that means beginning with the mindset that NO MATTER WHAT you will not spend beyond your means, you will not spend for the wrong reasons, and you will no longer pile on additional credit card debt. Instead of a “Cease Fire” agreement, you’re now going to create a “Cease Spending” pact with yourself.

  • Write out your very own “Declaration to Achieve Zero Debt.” Use the following model as your guide.

I , insert your name here, realize that I am in a financial hole. Therefore, I hereby vow to stop digging myself further into debt. I acknowledge that I can never be free from money worries if I continue to spend excessively, for the wrong reasons, or on unnecessary things. From this day forward (insert month date and year) I will be more conscious of my spending habits, being careful to keep my behavior in line with my desire to reduce my debt and achieve financial freedom.

Get this statement free at www.themoneycoach.net. Print it and insert your name and date. Then put it in a visible place, as a reminder of your commitment to financially empower yourself.

Diagnosis: You’re Suffering from the Debt Disease

Some of you who are over-spending have a real problem. In fact, you have a sickness, of sorts. Now before you think that I’m offering you a clinical diagnosis, let me say that I’m talking about a personal belief I have about people with massive credit card debt due to over-spending. I feel strongly that excessive debt is the worst possible financial cancer you can have. In fact, I believe that debt for many people is a byproduct of a terrible disease – an insidious malady known as consumerism – and as a symptom of a disease, debt should be treated as such.

If you think about it, many aspects of chronic spending, and the debt that results from it, are really no different from alcoholism. Check out the following 10 similarities:

Excessive consumerism and alcoholism both:

1. Generate stress and physical illness (migraines, ulcers, etc. can result from money worries)

2. Tear families apart (70% of all couples that divorce say financial strife was a major problem in their marriage)

3. Produce short-term euphoria or escapism from daily problems

4. Can be generational (Don’t you know people whose behavior just mimics what their mom or dad did?)

5. Make individuals feel shame, guilt and embarrassment

6. Have complex underlying or root causes for the behavior

7. Cause victims to feel out of control with their actions

8. Produce hangovers (for the alcoholic, a drinking binge leads to a physical hangover; for the shopaholic, a spending binge creates a debt hangover that lasts months or years)

9. May require individuals to change their habits, their friends, the places they frequent, etc. to reduce temptations

10. Have similar and predictable phases of deterioration:

  • Denial
    The phase where the person refuses to admit he/she has a problem, as in: “I don’t have too much debt,” “I don’t shop too much” or perhaps: “I can handle my bills.”
  • Worsening of the problem
    When the debts mount, late fees occur, bill collectors call, etc.
  • Hitting ‘rock bottom’
    Characterized by traumatic financial events, such as foreclosure, bankruptcy, personal or business lawsuits, and so forth.
  • Intervention
    Sometimes the intervention is from within the family, as when a husband takes away his wife’s credit cards. Other times, the intervention/help comes from an external source, such as when a person voluntarily goes to a debt management program.

Now that you can see the common areas between excessive consumerism and alcoholism, is it any wonder that debt has such a stranglehold on you?

But don’t despair. You don’t have to remain drunk with debt. You can kick your spending addiction, if that is what has put you in this mess. Each of you can break the cycle of debt. With the right know-how and some positive action, you truly can fix your finances, once and for all.

Again, it won’t be easy. But I’m going to ask you to exercise a little faith – and a lot of follow through. In other words, please don’t just read this book. Throughout the next 30 days, put my recommendations into practice, and you’ll see your financial picture drastically improve.

Next: Day 3 -  Put All Your Debts in Writing

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Day 2: Make A Resolution to “Stop Digging” (Part 2)

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Why We Spend

We all dole out cash for things we need, such as food, clothing and shelter. But we also buy plenty of things just because we want them or because we feel: “I deserve it.” After all, we all work hard for our money. So what’s the big deal about splurging every once in a while, right? Well, the big deal is that if you’re serious about getting out of a financial pit, your splurging days are over – at least for now.

You must also be careful of spending solely to impress others, like buying luxury cars or fancy jewelry just for show. Think about that for a minute. How many people do you know really just spend to show off the latest, the so-called best, or the most fashionable this or that? What good is having a Lexus or a Mercedes if you’re still renting and don’t own your own home? And whom are you really kidding if you’re buying Gucci and Prada, yet you still worry about your credit card getting declined?

Other times, people spend simply because they’re angry, depressed or bored. Maybe you just had an argument with your man – and ladies you know if I’m talking to you – and because he ticked you off, all of a sudden you’re in the mall. Or perhaps a boss is frustrating you on the job, or a co-worker is getting on your nerves. So what do you do? You start spending as a temporary, quick fix to feel better. Try your best to avoid “retail therapy.” That’s when you start purchasing cosmetics or an expensive new pair of shoes (even though you have tons of each at home) in an effort to give yourself an emotional pick-me-up.

Make a point to avoid spending out of habit, too. Many of us literally spend money on habits – things like cigarettes or alcohol. If you’ve got such a habit, realize that it could be costing you your fiscal and physical health. Even those habitual patterns that aren’t detrimental to our bodies might still be harmful to our bank accounts. For instance, I know many women who go to the hair salon, or get regular manicures and pedicures, mainly out of habit. They’ve always done it, it’s routine to them, and practically nothing on God’s green earth is going to stop them from hitting the salons week after week after week.

Now don’t get me wrong. I like to look as nice and as put together as the next woman. But my point is that if you’re struggling to pay your bills, can you really afford to fork over $50 a week (or whatever you might be paying) for the luxury of “beautifying” yourself? Personally, I don’t think it’s really worth it to look the part of “the fabulous diva” on the outside, when on the inside you’re stressed out and feeling more like “the fake debtor” because everybody thinks you’ve got it all together, but deep down, you know the scary truth about your situation.

There’s one other point about this subject that is worth addressing, in case you’re thinking: “Honey, getting my hair and nails done, that’s not a luxury; it’s a necessity!” I’d like you to at least consider another perspective about certain things that we spend money on. Read the advice contained in Day 16 for some insights about the ways we surrender our money on things that we might think are “necessities,” but others consider “luxuries,” “frivolous,” or “downright wasteful.”

By now some of you may be thinking: Darn! Is there anything I can spend on? And the answer is: Of course there is. Obviously you should feel free to spend money on the things you need. No one is suggesting that you walk around unclothed, without proper shelter or hungry. People will often say, “Lynnette, I also need a car – I have to get to work.” To which I answer, “Yes, you need a car, but does it really have to be a brand new one or a $50,000 vehicle?” Just live within your means and be reasonable in your spending – even when buying the things you need.

You can, and also should, spend to help others — i.e. to aid your family, church or a favorite charity — when you can afford to do so. And it’s even Okay to open your wallet to buy, have or do what you want (think art lessons, graduate school or travel) in order to improve your quality of life, express your values, or invest in yourself or family members.

But I’ve discovered that a lot of us spend for the wrong reasons. Sometimes people spend to exert power and control over others: as when parents tell their high school or college-age children: “I’ll buy you XYZ, but only if you do what I say, or go to the school I choose,” etc. Men (and women) have also been known to use money as a way to keep their significant others in check; or they buy them gifts in a misguided effort to secure the other party’s love and affection – or even to get out of the doghouse after an argument or some exhibition of “bad” behavior. All of this crazy spending must cease immediately.

Next – Day 2 Make a resolution to “stop digging.” (Part 3)

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Day 2: Make A Resolution to “Stop Digging” (Part 1)

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Famed billionaire investor Warren Buffett once said that if you find yourself in a hole, the first thing you must do is to “stop digging.” It may sound basic, but every day, people with massive amounts of consumer debt continue to dig themselves deeper into the red by spending as if there’s no tomorrow. If you know you’ve been over-spending, you must vow to end negative spending habits. This is crucial to fixing your finances. Let me put it another way: if you’re serious about chucking your credit card debt, you have to put an end to frivolous or excessive spending – starting today!

So many of us tend to make empty promises to ourselves and others: promises that we’ll spend less and save more; promises that next year we’ll get our act together; promises that with the next promotion or the next bonus or the next money that comes in we’ll make good use of that cash – anything related to whipping our finances into shape. It especially happens at the beginning of the year. Have you ever made a New Year’s resolution concerning your finances? More to the point, if you have such a resolution going forward, chances are you’ll need all the help you can get to stay on track. The December holiday season is the time of year that many of us tend to overspend – leaving us with big credit card bills, and the equivalent of a shopper’s hangover that lasts well into the following year.

For those of you determined to better manage your money, you don’t have to live a life of deprivation in order to get into the black. The best way to turn your financial resolutions into lasting changes is to take some concrete steps that won’t cramp your style, but will definitely improve your personal finances.

Here are some ways you can do just that:

  • Create a realistic financial plan

A proper financial plan provides you with a snapshot of where you are today – in terms of assets and liabilities, and your current cash flow. It also outlines your short-, medium- and long-term goals, such as saving for a down payment on a house or taking a dream vacation. Finally, a well crafted financial plan should include a number of “must do” items, such as you must start contributing to your IRA or you must pay off your Visa bill.

Don’t make the mistake of thinking “If only I could stay out of the mall, I could get my finances under control.” Staying out of the mall may be necessary for you die-hard shoppers who need to change your surroundings and avoid too much temptation. But getting your finances in order is not necessarily, and certainly not exclusively, about will power. It’s about creating such an awesome plan of action that you don’t want to deviate from it because you can clearly see all the benefits of having a financially sound household. After all, which of the following circumstances is most appealing? Scenario #1, in which you and your spouse are always bickering about money and you have to live paycheck to paycheck, or Scenario #2, in which you’ve lived within your means, and your money squabbles all but disappear? When you need motivation, remember that by sticking to your resolutions, especially your newly-created financial plan, you’ll not only save yourself big bucks, you’ll ultimately have financial freedom, and far less worries and stress about money.

  • Make this money resolution: “Before I buy something, I will think about why I’m spending. I will spend money only for the right reasons.”

Next – Day 2 Make a resolution to “stop digging.” (Part 2)

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