The New Dawn (2)

We left off talking briefly with my views/the current heading in U.S. Politics and the National budget crisis.   In this part, I would like to explain what I think we need to do as citizens and individual households.  It’s important, I feel, that when you are demanding a group (such as the Government) to balance their budget, that yours is under control first and foremost.  Stones and glass houses and all that.

As a nation we eat, drink, and breathe debt.  The credit card debt per household is $15,799, with nearly 610 million credit cards in circulation (http://www.creditcards.com/credit-card-news/credit-card-industry-facts-personal-debt-statistics-1276.php).  That’s a lot of debt.  This doesn’t cover the other types of credit like mortgages, student loans, bank/Credit union lines of credit, etc.  That’s a lot of debt, and for many people, they don’t have a strategy to get out on their own.  Minimum payments don’t get you out, statistically, they only drive you further in.

Some debt is good, some debt is bad.  Traditionally, owning a home and having a mortgage weren’t necessarily bad things.  In this market having a mortgage is akin to being under a guillotine.  Will the market drop further?  I know many people who have bought a house crica 2007-2008 who ended up gravely in the hole because of housing values just dropping.  Couple that with a handy (for the bank) adjustable rate mortgage and you can be in over your head soon after you’ve signed.  That’s not to say that buying a house is bad, but like any debt, it’s time to really reevaluate how much you can sustainably spend.

We’ve gotten into the trap of buying “same as cash!” from retailers for using a retailer branded credit card.  Done wisely, this can actually save money for you in the long run.  Being able to buy something on sale (Black Friday specials) can save you money coupled with no interest for x months.  It’s important to remember that you will be charged interest if you don’t pay it off in that time.  Ideally, pay it down/off very quickly, and avoid the temptation to charge charge charge.

I might have fallen down a rabbit hole there.  Back on track.  Getting out of debt can see insurmountable, especially difficult if you’re on one income (like us for the moment), or on a fixed income (unemployment, retired, etc).  Deep breaths.  Here’s some tips to get you started.

1) Write out your current debts.  Include information like interest rates, payment dates, and current minimum payments.

2)  Do your Budget.  How much are you bringing in?  How much is going for bills?  It’s important to include expenditures like gas, food, and your monthly allotment for fun (whatever it might be).  I almost always forget about food/gas.

3) If you’re able to make your minimums, great! you’re treading water, your feet can touch the bottom of the lake.  If you aren’t able to make your minimums, it might be worth talking to one of the many non-profit debt counseling agencies.  These agencies work as a middle man between you and your debt holders, often working out deals to lower your interest, and lower your monthly payment with the goal of getting you out of debt.

4)No new Debt!  George Bush (senior) had the saying No New Taxes!.  Well, we need no new debt.  This applies to both you the individual, and to the country.   You can’t swim to shore if the lake is constantly rising.  Try not to use your credit cards as much as possible, saving them truly for times of Emergencies.  At one point I kept my credit card in the freeze, in an 80z block of ice.  Yes, I literally froze it.  I had to think long and hard on what I needed it for before I could use it.

Debt isn’t inherently bad.  Miss managing it is.  It’s hard to get by in our modern society without any credit, as my wife can attest.  It can be hard to get an apartment, even a job, if you have no credit or poor credit.  A sound financial future is where you, me, and this country needs to be headed if we really want to make it through the next couple of decades.