Whatever does “Acquiring Debt is Not for the Faint of Heart” mean? It takes a lot to acquire debt:
- A decent work record
- A healthy record of previous debt patterns (the ratio of amount spent to amount allowed)
- Proof that you have paid your debts
- Proof that you have the ability to pay your debts in the future
- Evidence of your ability to continue to earn income (education, work habits–how often you change jobs, health
So, after you have gone through all of that, why overextend yourself by proving that you can? People apply for credit and with a good credit rating, they get more credit than they need. For example, Company A gives a family a ceiling of $5,000 to spend, even when they only want to spend a few dollars for something they need. They just did not have that money available to them in their budget this month. Unfortunately, some consumers use that $5,000 up as soon as possible, not realizing that will result in a lower credit rating. It is easy to become a victim of creditors, but rather than blame your having spent all of that money on them, you must look within and come to some conclusions about your own need to spend all of that money.
“You must gain control over your money or the lack of it will forever control you.”
Expect the Unexpected
Do not use the unexpected as an excuse to acquire and maintain debt. Terrible weather conditions, medical illnesses, and car accidents are three things that often show up unexpectedly with costs that fall within the deductible. That is sad. On the other hand, having emergencies like that is something we should prepare for by saving a certain percentage of our income every month. It’s called an emergency fund. So, are you asking how you should know what to contribute to such a fund? That depends on your monthly budget.
Oh, did I hear you say you don’t have a monthly budget? You just hope that your income matches what you have to pay out and that you will have enough left over to spend for something extravagant. What kind of thinking is that? The kind that gets us into trouble!
Secondly, most of us like to take vacations but don’t plan well for them, so we put the costs on a credit card and before you know it we have spent more than we can make monthly payments on. Vacation planning needs to go into a budget if it is important to you. So, now you’re thinking that you don’t have enough money to cover planning for emergencies or vacations. And I haven’t even mentioned Christmas, for those who celebrate it, college funds or retirement. And how about the costs for a graduating senior from high school?
“And don’t tell me debt is not a big deal. Debt will cut off your legs and laugh at you as you grovel in the dirt begging for mercy. If you don’t need it, don’t get it. If you can’t afford it, don’t get it. If you’re already in debt, get out quickly. If you think you’ll never get out, you’re right, you won’t.”
One way to get started with all of this planning is to start thinking differently about everything you do. Each of us will have a different answer. Adam Baker has his own answers which he covers in this video. Before you rush into something here, let’s return to the actual consideration of a budget. Adam’s video certainly revealed that some things are not necessarily as important to you as you once believed.
Hopefully, you are not thinking that you are too old for a budget. To the contrary, the older you get, the more often you need to think about it. You are probably going to live much longer than you thought–that’s what people do these days! You will find attached a budget designed by AARP which will prove helpful in establishing your budget. Make a plan for budget implementation. Let’s be fully realistic here. You are going to have to know how much you need for what you have to have in order to have the income in place to cover it.
Let every man, every corporation, and especially let every village, town, and city, every county and State, get out of debt and keep out of debt. It is the debtor that is ruined by hard times. Rutherford B. Hayes
Paying off your credit card debt may be done in more than one way. In an earlier post, I discussed consolidating your credit card debt. Another way is to make a list of those card balances, payments, and amount of interest, beginning with the company that charges you the largest amount of interest, which will accrue far more interest over a long period of time. In fact, if you check the bill, it will probably tell you what it is going to cost if you continue to make the minimum payment. End your list with the one that charges you the least. Look for a way to increase the payment you make to the first card. You are going to want to use any available money that you can find in your budget and make even more by having yard sales, selling items you don’t use or really need, or maybe even by going to a cheaper car.
For the remaining cards you owe money on, make the minimum payments. When you have paid off that first one on your list, apply what you were paying monthly to that card to the card with the next highest interest and pay that one off, continuing to do the same until you have paid them all. Is that not a wonderful thought! You can do it, and it will not take you nearly as long as you once learned it would. Another huge benefit of paying your debts down is that your credit rating will go up. In the meantime, refrain from using credit cards except for absolute necessities. Pay cash for clothing in thrift or second-hand shops, while placing what you no longer wear in a consignment shop.
In my next post, I will address credit ratings, how to improve it, and the importance of having the best one you can get. I am sure that you have tips to pass along. Please put them in the Comments section below.