DEBT is the four-letter-word of personal finance.

Most people have some debt with which to deal. Once the debt level gets to a certain point, it is nearly impossible to rid yourself of it. Interest payments crowd out all the productive (and fun) uses of your money until the whole thing implodes in an avalanche of expletives and misery.

Good Advice?

The personal finance gurus have their theories on how to deal with debt. There are some good ideas with hard and fast rules and heated discussions about whether any debt is good debt.

These advisory approaches, however, treat you the person in debt like a child who cannot make good choices for yourself. I have found in my personal, parental and professional life that if you treat people as inferior or incapable, they make every effort to meet your expectation of them.

So lets try something different.

The Root Cause

I believe (please give your opinion in thements) that the root cause of our problem today is the triumph of marketing. Immediate gratification and impulse beat out rational thought, logic and patience - and we as a society have been deluded into thinking that such behavior should now be celebrated.

If you want something you should have it.

If you cant afford it who cares? You should have it anyway.

Save by Spending

See that lovely flat screen TV? You know you want it. You mighte up with some bogus excuse, but the truth is you want the TV. You dont need the TV. Nobody ever died because their TV wasnt big enough.

Here is where the logic (or lack of logic) really gets turned upside down. You can save $500 by buying that flat screen TV today. You want it and now you can have it and save at the same time. Yay!

The truth is you dont really save anything by buying something your bank account is still smaller. But good marketing and a societal shift that gives a free pass to and actually encourages anybody who falls for this trick allows us to blow our budgets every year and actually feel good about it.

The Worst Offender

By far the biggest offender is our own government who not only spends more money than they make, but encourages us to do the same with our own accounts. Some example for our leaders to set. It is no wonder that most Americans are in hock up to their eyeballs.

You Know Its a Four-Letter Word When

If this conversation bothers you, youre not alone.

Debt does that to you. It is the raw underbelly of personal finance. Debt is at the heart of more family financial arguments than all the other topicsbined.

Debt is the giant, stinky elephant in the room that nobody wants to talk about, but if we dont start dealing with it very soon, it will kill us all (and probably bury us in manure).

4 Steps to Deal with Debt

Step #1: When at all possible, spend (including minimum payments) MUCH less than you make. Shooting for twenty percent of your gross ie is a good start.

Take those real savings and:

  1. Build cash reserves of three months of expenses and then,
  2. Pay down the debt (usually starting with the highest interest rate).

Step #2: Negotiate your debts.

No damage is done by asking for an interest rate reduction or a debt workout. It wont ding your credit score and wont (cant) make the terms on your account any worse, so ask! Do this for yourself, though. Dont pay someone else to renegotiate your debts for you.

Step #3: Move up; add a second job or add value to your current work so you can get paid more.

Where you are is where you are, but you can always grow from there. Increase your ie, but dont increase your expenses or lifestyle. Every extra dollar you earn should go directly to saving, debt or retirement.

Step #4: Be patient.

How do you eat an elephant? One bite at a time. You didnt build up this debt overnight. You wont get rid of it in a week, either.

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