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Get Out Of Debt, Fast…
If you want to be able to prepare for whatever life throws at you
When my husband and I were young (and unfabulously broke!) whippersnappers, we didn’t have a single credit card between us.
Somehow, we knew instinctively that if we’d applied for one (which, as unbelievable as this sounds now, required copious amounts of proof of income, length of employment, length of time at one address, etc.), we’d get turned down by people laughing their heads off on the other end of our request.
In spite of those censors, though, we did the math. (Hey, we went to Catholic schools!) We knew that if we wracked up $500 in debt, we would not be able to make even the minimum monthly payments without our young children going without macaroni and cheese (Aldi’s brand). And so we self-regulated, a habit I highly suggest for not only individuals but also banks, the mortgage industry, the healthcare industry, the auto industry, and the government. But I digress. :)
We kept ourselves from giving in to the lure of debt for the first 15 years of marriage and managed to save just enough cold hard cash to bail us out of frequent minor emergencies. We never got ahead, though, in the sense of our standard of living seeming to increase. We stayed even with the world, period.
Gradually, our income increased and like magic, so did our expenses. Why did it look like we’d be able to really start saving for the future, when the reality was that our growing family’s “needs” took all the increase and then some?
You see where I’m going with this, right? All it took was for us to begin to feel firmly entrenched in the prospering middle class (plus a loosening of credit which, of course, we now recognize as one of the biggest reasons why our economy is now flailing…), and darned if we didn’t go out and get us a shiny new credit card. And a big old payment on a Dodge Caravan, too!
Evidently, our fortunes had reversed and all of a sudden—-miracle of miracles!—-we were “good for it.” Or were we?
I can’t tell you how many zero-percent-on-balance-transfers I’ve opened over the years. Granted, we never spent a single dime on interest to a credit card company. But the balances, and attempting to pay WAY more than the minimums in order to pay them off in our natural lifetimes, kept us from adding substantially to our savings. For YEARS.
Have you noticed that when you don’t have a hefty emergency fund, you seem to have no choice but to whip out that credit card yet again? But how do you build up your cash reserves while continuing to service debt?
They say the first step in getting out of a hole is to stop digging. If you want to get out of credit card debt, you must stop adding to it TODAY. And that’s exactly what we had to do. Two years ago, we accumulated enough of a cash reserve to get us through everyday life, and then every spare cent went to pay down debt, Dave-Ramsey-snowball style.
I truly enjoyed the satisfaction of watching several significant debt balances disappear one-by-one. I LOVE getting free-and-clear car titles in the mail, instead of bills from auto finance companies. And then, to be able to divert those funds into savings? The way I see it, that’s one of our Big Tickets out of the mess we (as a nation) currently find ourselves in.
If preparing for emergencies, downturns, and disruptions in services is an important goal for you and your family, I hope you’ll make it a priority to get out of debt as quickly as possible. Once you’ve accomplished that, you’ll find it easier and less stressful to go about building for your future.
And you won’t require a single credit card to make it happen.
If You Knew For Certain That Your Life Was About To Change
And not in a good way, what would you do to get ready?
I admit that I didn’t know for sure that the business my husband and I own and operate would eventually be hit hard by the downturn in the economy, but of course, I suspected as much.
It just makes sense, doesn’t it, that some clients are going to have to cut back on the goods and services they formerly purchased from us, until their own businesses are back on a better footing? Still, until last Friday, our corporation continued to earn as much money—-or more—-than before things started going south.
But all that’s changed now, if this past week’s news is any indication. In fact, after hearing from three separate long-term clients, we’re estimating that upwards of 40% of our income will be disappearing within the next month.
We’ll be scrambling to find new clients to replace this loss, but in the meantime, I’m happy that I’ve made some significant changes to our personal balance sheet that will serve us well going forward.
It’s useful to imagine bad scenarios in life, if only so that we can prepare ourselves to withstand hardship if and when it arrives. And honestly, is there ever a circumstance in life that can’t be mitigated more easily from a debt-free position?
Getting completely out of debt (except for a smallish mortgage) has given us a far better return-on-effort than any investment in the stock market has ever returned. Toward the end of working our Dave Ramsey-style debt snowball, I think I was sending two-thirds of our monthly income to finish off that final bill.
And guess what? No sooner did we make the last payment than the stock market crashed. We lost plenty of money, but the impact on our net worth would have been truly terrible if we’d had a pile of debt on the other side of the equation.
As it was, our net worth took a dip but not for long. Because the very next project I undertook after satisfying the debt was to start accumulating a much more generous emergency fund than we’d ever had before. Plus a car replacement fund, a home repairs fund, a Christmas fund, and well…you get the idea.
I didn’t know our car was going to start behaving really badly, causing us to realize that we needed to update with a late model used car sooner than we’d planned. But when the time came, we actually had the cash saved up in advance—-something of a miracle for us!
Last week, right after the exterior of our house got wrecked by hail and before we found out about our business problems, we closed on a refinance. We lowered our rate, shortened the remaining term to ten years, and will be saving $400 per month.
So, yeah. Our lives are changing, and our successful business is facing difficulties we couldn’t exactly predict. And yet, in a way, we could. I don’t imagine we’re going to have the easiest time getting through this period, but I do know this: If we hadn’t buckled down and prepared for an uncertain future, we’d be in much worse shape going into this than we are.
Any steps you could take now that would soften a blow, should it come? Why not get started, while the stress isn’t as great as it would be during a full-blown disaster?
Who knows? It could even turn out that your pre-emptive efforts will keep disaster from striking at all. Or, if it does, its effects won’t take as desperate a toll.
Can Delayed Gratification Be Its Own Reward?
Or, what if you sacrifice now for later, and end up with neither?
One of the happiest truths I’ve ever discovered is that I can find real joy in delayed gratification.
It’s a good thing, too. Because sometimes I make some dandy plans to cut out this and postpone that, only to find out that our income is about to get axed unexpectedly and we’re going to end up unable to afford this, that, or the other thing.
But what about the sacrifice I’m making in order to save money for a new car? Hey, I could have fake nails and an unrealistic tan and some tatoos that look a lot different after I gain ten pounds, if only I didn’t defer gratification. The LEAST I expect for denying myself those small pleasures (and many more) is to be able, in the final analysis, to spend my hard-saved money on something I truly want and need!
And yes, I’ve got a car fund. But our lives, in spite of our wonderful intentions, often interfere with our best laid plans. What if, instead of a new car, we need that money to cover economy-related down times with our business? What if we realize that we aren’t nearly as prepared for emergencies as we should/could be, and that a used car would meet our needs and give us some cash to further bolster our efforts toward self-reliance?
It’s a blessing in life if you find you can be content with the basics of food and clothing and shelter. It’s a fantastic blessing if you can train yourself to bypass what you think you want right this second in favor of what you’re reasonably certain you’ll need next month or next year.
And if it turns out that your fully-funded travel account, which you intended to spend on a cruise, instead is called upon to get your through a short term disability you had no way of predicting, well. How exactly is that a bad thing?
You’ll get your chance to travel, and in the meantime, you’ve been able to provide for a shortfall without having to take out another mortgage on the house or top off the credit cards.
That, to me, is the kind of instant gratification that thrills me no end—-being able to function as our own mini-bailout program.
I love it that delayed gratification really can be its own reward, and as an added bonus, I’ll never have to worry about a tiny rosebud tat on my rear end turning into a giant overblown peony.
I’m just sayin’.
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