Sunday, November 9, 2008Getting Free of Debt
To start off our week's theme on the consumer society we live in,here is a little light relief from Saturday Night Live on becoming debt free. It's a couple of years old, but still right on.
Wednesday, July 9, 2008Getting Out of Credit Card Debt
There are lots of financial advisors, coaches, well-meaning uncles, and friends that advocate getting out of debt, particularly credit card debt. I thought you would enjoy, and perhaps be educated by, this piece by marketing expert and author Seth Godin, who blogs at http://sethgodin.typepad.com. He calls the piece: Urgent personal finance advice
“If I could only share one piece of personal finance advice to grads or to just about anyone, it would be this:
Only borrow money to pay for things that increase in value.
It's a short list: your business, your house and your education, mostly. Stocks if you're smarter than me. That's pretty much it.
If you have credit card debt, you're in big trouble. Your bank account has a huge leak in it, and it's getting worse. Hence the urgency.
If you have credit card debt, that means that every time you spend money (even cash), you're borrowing money to do so. And so, if you're going out to dinner or buying a new pair of shoes, you've just broken the single most important rule of personal finance. You're spending borrowed money on stuff that is decreasing in value.
This is an emergency. It's an emergency because every single day you wait, the problem gets worse. A lot worse.
My suggestion: Shift gears to live well below your means. And do it immediately. That means:
No clothes shopping
No cable TV bill
Take in a tenant in your spare bedroom
Carpool to work
Skip vacation this year
Eat brown rice and beans every night for dinner. Act like you have virtually no income.
The result? You'll save $5,000 to $20,000 a year. Send all of it to the credit card company. Do this until you're debt free, the faster the better.
There. Now you're rich. Now you get interest on your savings instead of paying the bank. Twenty years from now, this emergency action will translate into perhaps a million dollars in the bank, depending on how much you earn and how serious you are.
You can thank me then.”
Everyone picks on Starbucks. But if you follow this advice and you are on the way to reducing your credit card debt, no reason not to treat yourself to a delicious cup of coffee.