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Take Control! Get Out of Debt!

by Kevin Hoctor

Control is not always possible. You can't control the weather or what other people think or say, but you can control your own actions: I'm specifically talking about spending in this case.

As Americans, we love to spend more than we make and we are being offered the tools do to it all the time. How many offers for credit cards do you get in the mail each month? Me, I think I get about a dozen. Let's see, if I was approved for all of those, I could have almost 150 new credit cards each year! So why is getting control of your spending so important? The simple answer is that debt leads to more debt and can ruin your life and your family.

How often can you tie a fight with your spouse to money? Probably a good percentage of the time. Have you ever had a bill collector call or send you a letter? Do you feel warm and fuzzy because he cared enough to call? Probably not.

Credit card balances are debt. So is that loan from Uncle Phil (and you don't want Aunt Donna to think you welshed on a loan, do you?). Your mortgage or your new car loan can be distinguished from unsecured debt because the lien holder will repossess these items to fulfill your loan if you don't make your monthly payment. You won't have the debt or your car. Even though secured loans aren't technically debt, you have to be very careful about buying things when you can't afford the monthly payment. It's a very quick way to end up in debt because you had to borrow money to get that new car repaired and you have no money left because the loan payment was so high. There's a good book that is easy to read and lays all this out nicely. Check out How to Get Out of Debt, Stay Out of Debt & Live Prosperously by Jerrold Mundis to learn more about defining debt.

Now that you know that debt is bad (like this was some dark secret), how do you go about getting control of your spending? By creating a spending plan of course! You can call it a budget if you want, but I relate budget to money as I do diet to food. No one wants to go on a diet because you are so restricted from eating certain foods. It's way too oppressive. Budgets can feel the same way. Even in the software business, when I worked for a larger company, we had a research & development budget. This meant that we had a cap on our creativity. We couldn't write the world's greatest software product because we had to get approval first. Ugh! Nasty.

A spending plan is much more flexible. Group your spending into categories (or buckets if you are using MoneyWell) and decide how much you are going to spend on each. Then if you want to go out to dinner, but you have no money left in that bucket, you simply can take it from another bucket. There's no shame or asking for approval because you are not going into debt, you're simply reallocating money that you were going to spend on something else.

Make your spending plan something you can comfortably live with and not and something that screams, "You're on a tight budget! You can't have fun!" Make a bucket or two for fun. Go to a movie once in a while. Have a nice meal. Buy some fun, cool software (that last one was supposed to be subliminal, work with me here). If all you ever eat is egg whites and skinless chicken, you're most likely going to break and end up bingeing at Ben and Jerry's. The same goes for designing your plan: If it is too restrictive, you'll probably end up on a binge that will make the CEO of Visa whoop for joy.

The hard rule here is that you can't swipe that credit card. You are only making Mastercard and Visa rich. They may try to convince you that sliding that card is "priceless," but there is a huge price: your financial security! With the advent of debit cards that are as accepted as credit cards, there is really no argument for saying, "But I need my credit card to rent a car!" Just dump the revolving credit. Trust me, Mastercard and Visa are not going to ask the government to bail them out because of a lack of earnings. I think they've made enough off of me alone to improve their earning reports in years past.

You don't have to buy either MoneyWell or Debt Quencher to get control of your spending (even though I happen to think those are fantastic tools), but you do have to start tracking your spending somehow and you cannot, under any circumstance, get deeper into debt. It's your happiness: Take control now.