It can be overwhelming when you make a financial mess and you don’t know what to do about it. It can be hard to see the light at the end of the tunnel when bills exceed paycheck. It can be easy to say, “Let’s just eat, drink, and be merry, because tomorrow we’ll be in debt, anyway.”
Are you there? Do you like how that feels? Or do you feel that nagging tug to get your financial house in order, sooner rather than later?
We did. Way back in 2007, my husband and I took a drastic turn in how we handled our finances.
We had always been frugal; that is, we weren’t extravagant, we didn’t take fancy vacations, we bought used cars and then only rarely.
But, in 2007 we realized that our spending had gone beyond our means and we had the debt to show for it.
Thanks to God and some helpful resources, things look a lot different than they did twelve years ago.
You can do this, too. Really, you can.
But, where do you start?
Lots has been written on the topic of personal finance and debt-free living. While I’m no economics expert, I can tell you what worked for us.
This may fit your situation; it may not. I can’t tell you that. But, I can tell you how we paid off over $18,000 in consumer debt, feeding 5-6 children, while making less than $60K a year.
It’s no get-rich-quick scheme. You don’t have to buy any fancy software or even a book. But, it does take sacrifice, hard work, and relying on God instead of despairing. Over the coming weeks, I’ll share the steps we took to get out of debt. This week, probably the biggest and hardest and first step:
Yes, I know, plenty of people espouse the “responsible use of credit cards.” We did, too. In fact, we paid for everything with our credit card. We figured that if we were spending the money anyway, we might as well get some perks from it.
About $40,000 filtered through our credit card every year. We used it responsibly and most months, brought the balance back down to zero.
But, what nagged at me for a long time was that even when we “paid it off every month,” we were still at least a month behind. Because of grace periods and such, at the end of the month we were paying for stuff that, in most cases, was long gone.
This is called credit card float.
We had to throw new money at old experiences and hope that new money would come in time to pay for the fun we were having today.
Paying for the past gave me a very unsettled feeling. And it came back to bite us when we experienced six weeks of no work for our construction business. All of a sudden, we had a big choice in front of us:
- put every penny we had toward the credit card in order to pay it off and live on credit purchases in the coming month
- let all that debt ride (with all the interest) and try to break the cycle of revolving credit.
We chose the latter. It was hard to do. But, we did.
That first month, we figured out how much money we had and lined that up with the bills. We paid the minimum amount due on credit cards and loans. We paid cash for any new purchases.
While it was hard to know we had “debt,” it felt good. Despite the humbling moment of “carrying a balance,” it felt good that we were going to get off the ferris wheel.
Can’t you use credit cards responsibly?
For years I disagreed with folks who insisted that you could use credit cards responsibly. It seemed that they wanted to ignore the existence of credit card float.
Since then I’ve realized that you can still use credit cards and avoid debt — if you pay it off regularly, like on a weekly or daily basis.
Using a credit card for convenience or for travel hacking can be done responsibly, but I think it’s best done when you know that your cash on hand exceeds any and all charges.
But that doesn’t mean you should just keep using credit cards.
Do people spend more with credit cards?
I’m convinced that the FishFam spent more money using credit cards than when paying cash. And if the study is true that say credit card users spend 12-18% more than those who pay with cash, then we spent at least $4800 more each year than we would have without using credit.
No wonder it seemed like we were getting sucked under. We were!
So, my first piece of advice in getting debt-free is to stop using your credit cards.
You’re in debt for a reason. Likely because you spend more than you make and don’t have a good handle on where your money is going.
Pay cash for all purchases. It feels different to hand over green paper than a piece of plastic. Your hand won’t want to let go in quite the same way. You’ll become a little tighter fisted. And if you’ve got debt, well, then you should get a little tighter fisted.
Paying in cash has helped me “see” the money slip through my fingers, literally. And it’s helped us save money and get out of debt — and stay there.
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