Twenty Something Sense

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A Plan, a Failure, and a Lesson Learned – Part #3
by Mike Rubenstein

Fool Me Once, Shame on You. Fool Me Twice…
There is absolutely nothing easy about getting yourself out of debt. It takes dedication, sacrifice, frustration, and often boredom. Below is some of the most important advice I can give you from personal experience about how to get yourself out of debt.

Debt Recovery

• Lower your credit card interest rates as much as possible. This almost always requires you giving up your rewards but your rewards will not be sufficient enough to make up for the interest you will be paying
• Examine the possibilities of balance transfers. If you find a card with a significantly lower rate on balance transfers than your current credit card company can give you then you should definitely take advantage of that opportunity. Any way you can lower your interest payments is worthwhile
• Control your spending! You made the budget for a reason, now you must stick to it. If you do not stick to your budget you will continue to push your debt into the future
• Put the plastic away. If you are carrying a balance on your credit card, use cash wherever possible. Most credit cards use an average daily balance when calculating interest so if you keep running up the balance your average daily balance will be much higher and you will owe more interest. Use cash to keep your balance as low as possible while you attempt to pay off your debts.
• Find cheap hobbies. Debt recovery can often lead to nights spent at home alone rather out with friends at the bars as you may be used to. Finding hobbies you can enjoy will ease the transition into your new lifestyle. Some excellent (and beneficial) hobbies that I have found during this time are working out, reading, cooking, and of course the boob tube.
• Debt Prevention

So now you are out of debt and you are feeling great. Well remember that while this is a time to celebrate, don’t go off and buy yourself a trip to Hawaii. You have just gone through one of the most frustrating and stressful periods of your life and do not want to put yourself in that situation again. So how do you stay out? Below is some more advice I can offer.

• Do not count on raises, promotions, or bonuses when budgeting for the next year. After my first year and a half of work my salary had increased 82.5% and I had been promoted twice. Our market was booming and I saw the opportunity for my managerial position less than a year away. We were then acquired by another company and the economy proceeded to take a total nose dive. Many of you have most likely heard the adage about the market that says “past performance is not indicative of future results”. This cliché is also applicable to young adults who may have had some quick success in their career. There are just too many variables in play, even if you think you can easily see your next promotion right in front of your eyes. Remember when working for a large corporation you are only but a number. Don’t make the mistake of feeling any larger or different than that.
• Don’t give up on your budget. Your budget is a wonderful tool that you have now become used to living within. Now, however, your budget gets to change and become much more manageable. Rather than setting your budget by determining the absolute least spending you can live with, set your budget based on how much you would like to save each month. Put that amount as a fixed expense right up there with rent or mortgages and have that amount moved from your bank account as an automatic transfer into your 401k, IRA, or whatever your preferred method of saving is. The remainder after your savings can then be divided up based on what is left of your disposable income.
• Don’t forget what it was like to be in debt. Have you ever had a girlfriend or boyfriend that you dated for a long time, broke up with, but kept going back to again and again? If you have then you likely know that these relationships usually end with heartbreak, frustration, and a lot of wasted money. Well think of your debt in the same terms. One bad experience is plenty; no need to repeat the same misery again.

Once you get yourself debt free, it feels like you have the weight of the world lifted off of your shoulders. I am not quite there yet, but I can see the light at the end of the tunnel and it looks glorious. Every single day of my life is consumed with the thought of all the money I owe and how much savings I have missed out on. Next to your health, your financial security is the most important thing you can possibly have in life. Just as it is necessary to take care of your health once you start getting older and can’t metabolize candy and cookies like you could when you were a kid, it is necessary to take care of you financial security as well. You have to work at it, struggle with it, and realize that your prudence now will lead to prosperous times down the road.