Here’s How To Get Out Of Debt - Many people I see out in the market place today treat their personal household budgets like it were the federal budget. This is an easy model to follow because after all doesn’t Uncle Sam have your best interests at heart? Well they say they do, however, Uncle Sam can do something that you can’t do. If Uncle Sam wants more money all he needs to do it print it. You can’t do that.
Your options are not the same as your Uncle. If you start to spend more in one area of your budget then you have to stop spending in another area. If you don’t want to stop spending then all you can do is go into debt a.k.a. deficit spending. This means pay interest at about 20% on a credit card or withdraw money from your saving account, which will prolong your retirement past the normal 65 years of age.
When Uncle Sam goes ahead with deficit spending without increasing taxes or reducing its spending in other areas, we as citizen, do one of two things. We do nothing, mainly because we don’t understand what is happening when our Uncle deficit spends, or we criticize and complain about our Uncle’s spending. Get Out Of Debt – Here’s How
Our Uncle doesn’t care to any great extent because he knows all he needs to do is print more money if he needs to. This can cause a lot of other problems that we will address in another post.
Do you now have a running balance on your credit cards? Have you taken out a second mortgage on your home to go on vacation or put a swimming pool in your back yard? Do you pay your bills out of your IRA or 401-K’s depleting your long-term savings? Then you are deficit spending just like your Uncle Sam!
The only way to increase spending of your budget is to cut spending in another budget group. Otherwise you will be pulling money out of your long-term savings and going further into high interest debt. Here’s How To Get Out Of Debt
Let’s say you want to increase your food budget by $50.00 per month because you have decided to start buying only organic foods. By your field study you have figured it will cost you the extra $50.00 per month to eat only organic foods. What you have to do is decrease another budget group like clothing or dining out by the same $50.00 to prevent yourself from deficit spending. If you don’t you will be back at paying more money on credit card debt (20%) or decreasing your long-term savings.
This would also include a big-ticket item like a new HD-TV or a special long vacation. Pay for it upfront of cut your budget in categories that will cover you big-ticket item. As a thought, do you really need those big-ticket items in the first place? Are they worth the knot in your stomach you will have when the bill arrives?
It’s a shame we are never taught in school the fundamentals of earning, saving and spending of our money. It would serve us all well if a 6th grader needed this knowledge to advance into junior high school. Stopping deficit spending takes work as it is not easy, however, with the proper knowledge you can learn how not to deficit spend.
Here’s a last comment about deficit spending. Sometimes you have to buy things on credit. Like for a home remodel or a new car. If big-ticket items are truly needed and worth more debt and the interest that goes along with it, use these insights to help you with your personal budget.
- Do NOT put them on a credit card or high interest loan. Dial for dollars and seek out the best terms and rate for any other loans.
- Do NOT take out a loan you are not confident about being able to pay off in a reasonable time. 5-15 years are OK but sooner is better.
- Check your budget categories and see where you can cut your spending in those areas to offset your new debt.
- Neutral debt is good.
- Here’s How To Get Out Of Debt