You have been working so hard and for so long, but ended up accumulating credit card bills, a car loan and a huge mortgage to pay back. You have kids to send to College in a few years and it is getting harder to save anything. You want to look for a better job in another place but relocating is becoming a hard option now. Your financial worries are creeping into your family life and you are not able to spend good quality time interacting with them. If this is you, read on.
Well, you fell for it. Banks and credit card companies love people like you, as do advertisers and real estate agents. Unfortunately, it’s easy to get into debt but hard to get out of. There has been a huge attitudinal shift over the last several years where governments have created an environment of low interest and encouraged people to borrow to boost economic growth. Debt is seen as good for the economy and people no longer feel bad to borrow. This has created an environment where everyone is in debt, from governments, to companies to consumers. Governments can print money, but consumers cannot. So you have to borrow responsibly. But if you are already deep in debt, don’t worry, there is hope, but you will need to take some drastic steps. You have to do some changes to your life now and if doing so is important enough to you, you’ll find a way to do it. I’ll show you the path, but you have to walk it.
First step is to cut back spending
First things first: when you find yourself in a hole, stop digging. If you’re buried in debt regardless of how you got there, and unable to service it, then there is a miscalculation in the way you have expected your income and expenses to match. Although you may not like to hear it and you feel justified that there is no way to cut back on your spending, it is a problem associated with mismanaging your money. Now it’s time to cut back. Even small cut backs can add up. No more ten dollar cups of coffee, meals out, new cars, or first class vacations, at least for now. If you can barely make your mortgage payments, it’s time to move into a cheaper place. If you can’t make your car payments, it’s time to either get a bike or sell it and get a cheaper one. Yes, doing this may hurt you internally, but there is no point pretending to be rich and be poor and stay submerged in debt. There is a saying that “Rich behave like poor, to become richer; the poor behave like rich, to become poorer”.
Next step is to become financially literate
The next thing you need to do is start becoming financially literate. You can’t get prosperous by simply cutting back on expenses. You need to find intelligent ways to multiply your $1 and figure out ways to generate alternative sources of income while still holding a job. There are plenty of avenues today thanks to the opportunities presented with the power of technology.
Pick up a book like The Richest Man in Babylon. It’s both inspiring and informative. It’s also a very quick read that provides remarkably sound advice that has stood the test of time. Following its recommendations would take you a long way on your journey back to financial health. There are countless other books on financial literacy that cover both cutting expenses and increasing income. Find resources for both. The Richest Man in Babylon, though, is the best jumping off point.
Spend quality time with family
When your finances are in disarray, the people who love you the most, would probably receive the brunt of your frustration, resentment and anger. You may feel frustrated with them, shout at them or feel angered with small actions. That’s not a healthy sign. Regardless of the state of your finances, you need to do what is right for your family by spending at least some quality time with them and talking matters other than your financial worries. Sure, you may not be able to go out and spend money, but find things that you can enjoy with them for little or no money. Go for a movie together, go on a short inexpensive picnic, play with kids indoors or outdoors as convenient, take them to the music class or participate in some volunteering work together etc. Ideally you should spend time every day with your spouse and children, but make sure that you block off time at least a few days a week to spend time with them individually and as a group, and don’t spend it watching TV.
Responsible financial management is a life long necessity
You must take personal financial management seriously in your life and preferably from an early age. Financial literacy is not taught in Schools and Colleges, but this is one skill that will be valuable for life. Get some basic skills to learn to multiply your money and minimize debt exposure. Never be carried away by what others are flashing and feel the compulsion to have that item with you. If you have surplus funds, sure you can spend that. But there is no point borrowing money to buy things that are really not essential. Don’t forget, sorrow follows borrow. when you are in debt, you are all alone to repay it. Looking rich outside and feeling poor inside is a losing game to play. Instead work your way to riches even if you have start from modest beginnings.
Sairam Narayan
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