Wednesday, September 14, 2016

Debt Reduction Tips 101

Today's story is inspired by a stranger I met yesterday.  "I don't spend any money unless it's in the envelope I carry around with me," she said.  I immediately knew she was one of "those people."  She smiled when I told her my wife and I are living like no one else so we can live like no one else.  Debt reduction is simple but also complicated when friends and family try to convince you life without debt is an impossible dream.

I believe debt reduction is similar to weight loss – a little bit at a time and you can achieve your goals.  The key is to know exactly where you are on the scales every day.  Are you going up or down with your debt?  And if you want to go down without fail, you need envelopes.  Yes, envelopes.  When you run out of money in your monthly envelope, you don't get to spend any more until the next scheduled deposit.  The first month is the most difficult because it's culture shock.  Once the first ounces come off (I'm referring to the credit card interest on your monthly statements) you can start living the dream many others before you discovered on their own.

Friends and family keep asking if we're ever going to upgrade our vehicles.  Some argue you need to trade in your car every two years to avoid depreciation.  I don't worry about depreciation.  I know what car payments do to my envelopes, they keep money out of them.  That's why so many Americans are broke.  Why not pay your car off first and then keep depositing the money you were giving your bank into an envelope marked "my dream car"?  I say dream car because once you have enough money to pay cash you can do something many believe is only a dream – purchase a car without car payments.  That's your debt reduction tips 101 for the day.  Go get some envelopes and start using them today.  Remember to step on the scale and measure how much your debt weighs and keep tracking.  Stop spending when the envelope runs out of cash.  Class dismissed.  Have a great day.

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