July 30th, 2008

Macbeth the Usurper

Umpteen Years Debt Free

At this time of year, I celebrate my freedom from credit cards. In these times of difficulties, people out there need to hear that you can do this and you can still live a good life.

Anyone can do this. It is easy, but requires patience. This is how I did it.

Step 1: STOP USING THE CREDIT CARD.

Once you stop using your credit cards, your payments slowly drop to nothing.

In order to stop using your credit cards, you must set up some alternate form of paying for something.

- Use cash.
- Use a check card to a limited account.

What if you don't have the money for the things that you need? You prioritize. You can have everything that you want, just not everything at the same time.

1. Pay your bills.
2. Allot yourself "emergency" money.
3. Allot yourself a fixed amount of "fun" money.

Now, LIVE IT. Just LIVE IT. You will run into problems and goofs. That's good. That is a learning experience. Work through those.

Will you have to give up things? Yes. Most certainly. The trick of this system is that nobody tells you what to give up. You will find that you give up those things that you want the LEAST. As a side affect, you wind up sorting out your priorities. That's a good thing.

I gave up one cup of coffee per day at work. It was cheap coffee, too. $1. Now, do the math. $1 x 20 Working Days per Month x 12 Months = $1 x 20 x 12 = $240. Not bad.

You can save up for most big ticket items if you develop disciplin and truly want them. All you require is patience.

Here's the good news. When you have paid off you credit cards, you have developed a discipline and a system for your money that allows you to continue without them. Only now, all that money that went to credit cards can go into your investments. Finances get MUCH easier.

Some things are worth borrowing for. For example, you car and your house are worth borrowing for. I borrowed to buy my laptop. There is nothing wrong with borrowing, you just need to be very mindful of when and why you borrow. My credit union charged me 7% for my laptop. That's far better than 17% that the credit card companies charged.

What about emergencies? Nobody can account for those. Call that "two steps forward, one step back." You do what you need to do, then you hop back on your disciplin wagon. Part of socking away cash is so that you have cash for emergencies and other unexpected expenses. That is to say, you should expect the unexpected, so put aside cash for that purpose.