The key to avoiding debt is to spend less than you make.
It’s that simple.
And yet people still spend more than they have on credit cards. Why?
There are many reasons.
We live in an age of consumerism where we are constantly bombarded by advertisements from corporations telling us that life will be good and that we’ll be happy if only we purchase their products.
We live in an age of instant gratification where we are told we can have it now and pay for it later.
Everyone else is doing it.
The list goes on (and on).
One of the lessons that I’ve learned in working towards becoming debt-free is that the cost of buying it now and paying for it later is much higher than we imagine at the time. An item that cost £300 at the time can eventually cost £3,000 to pay back.
This happened to me.
Before I began seriously looking at my debt and implementing my liberation strategy I only paid the minimum amount on my credit cards each month, to maximise the amount of cash I had to spend. On one card, over the period of a year, I paid £3,000 in payments and the debt on that card only reduced by £300 (with no spending).
In a way that was my wake-up call. It spurred me on to devise my plan and strategy, and to write about it.
In dieting circles there’s a well-known phrase, “a moment on the lips is a lifetime on the hips”. That phrase can equally apply to credit card debt – a swipe of the card is a lifetime of payments.
If you have credit cards it’s worth thinking about this before you hand that card over to the shop assistant. Those two minutes in the store can turn into years of repayments.
It really could cost you much more than you think.
The Great Escape: my personal strategy to liberate myself from debt and wage slavery is 8 months old. In that time I adhered to the plan and made regular payments. I also made enough on the side to save up and purchase a new laptop.
My credit card debt is going down. The numbers are as follows:
Credit card 1: £7,500 down to £6,000
Credit card 2: £3,900 down to £3,600
Credit card 3: £2,100 down to £2,050
It’s a slow process.
I’m making double the minimum payments on credit card 1 and have paid off £1,500. The snowball effect on this card hasn’t materialised yet but I’m expecting this to happen over the next 6 months.
On credit cards 2 and 3 I’m paying just over the minimum amount each month. As a result credit card 2 has come down a bit. Credit card 3 turned out to be a little trickier than expected. In making only minimum payments on this card the debt actually started to go up! So a few months ago I increased the payment level slightly. This seems to have worked.
What is shocking is that I made c.£4,800 in payments in this time, for the debt to be reduced by c.£1,800. That’s £3,000 to the credit card companies.
This is madness.
I am therefore more determined than ever to stick to my plan and to become debt-free.
Dealing with my debt doesn’t mean that I sell everything and do nothing for 3-years. I still engage with and enjoy life, albeit more mindfully (particularly around spending).
The ‘Golden Rule’: spend less than comes in (monthly salary) is key to all this. Some months are better than others but overall it seems to be working. This extra money goes into a buffer fund. Anything saved beyond that can then be used for modest treats: days out, experiences etc.
I continue to complete online surveys. This is definitely not a get rich quick thing to do but it does generate modest amounts of cash and vouchers.
What I have learned is that everything adds up, however small.
De-cluttering and selling all the excess ‘stuff’ I’d accumulated over the years on eBay has proved really beneficial. My life has become simpler, my flat has more space and I managed to save up to purchase something that I really wanted/needed: a new laptop.
Most items have now been sold which leaves me with an interesting question: how to take this (selling on eBay) to the next level?
I’d like to continue to make some additional cash but in order to do so I need things to sell.
I have a few ideas ranging from collecting shells on a beach (and packaging them for sale) to trawling the local charity shops to clearing clutter for people who simply want to get rid of their stuff. To be honest though I’m not really sure.
This is where you come in.
I’m looking for any ideas that you might have: either direct from your own experience or from something you’ve heard about.
What would you/do you do?
Answers in the comments below please!
Consumer debt is not an easy thing to deal with. We are told we need ‘things’ to make us happy and that we can have instant access to these things on credit. This gets us into debt. Debt suffocates us, traps us, and leaves us tied to jobs where we have to earn huge amounts of money simply to service that debt.
We don’t benefit. The only people that do are the credit card companies.
The result? We feel down, helpless and ashamed because of the debt. So we spend more, in a vain attempt to make ourselves feel better. It becomes self-perpetuating.
The truth is: happiness is an inside job and it doesn’t cost a thing.