Published On: Wed, Jan 29th, 2014

End Your Debt Relationship!

Don’t PANIC!  Living and loving the all cash life does not require you to give up your debit cards and credit cards, well perhaps your credit cards.  Living and loving the all cash life is about moving away from a dependence on debt, creating more options for your family and freeing yourself to be able to love, live, and give according to your dreams.  The utilization of debt to fund the “American Dream” has turned into the path to an American nightmare.  The US now carries more than $850 billion dollars worth of credit card.  

Clearly the use of debt can help make the opportunity to receive a higher education, purchase a home or start a small business possible.  However, many are stuck in a habit and mindset of using debt as a way of life or to fund a lavish lifestyle.  The “opportunity” to attend the prestigious privatman thumbs up!e college you love was a great experience while it lasted, but graduating with no job in site and a $50K student loan due was clearly not the “opportunity” you were seeking.  Here are 3 quick tips to end your debt relationship and start living and loving the all cash life. 

 Step 1: Find your inspiration to take control of your financial future and end your debt relationship.  Use it to fuel your journey to financial freedom.  What truly inspires you?

  • Being able to live and follow your dreams
  • Being able to spend more time with your kids (well maybe not)
  • Being able to tell your boss peace!, or any other choice word that comes to mind
  • Being able to travel and see the world
  • Being able to make yourself ‘Recession Proof” so regardless of what happens with the economy you’re in a good financial position.

Step 2: The Debt Detox

Removing the financial impurities from your life starts by creating a spending plan; this is code for budgeting.  I think it’s safe to say a great deal of us don’t live on a budget. If you were like me, you made the money, paid the bills, and spent whatever was left over.  I didn’t get on a budget until I had almost completely drained my savings account.  Not living on a budget is one issue, but a bigger issue is not having a clue how much you are actually spending from day to day.  Here’s where you start.

  • Reflect Back & Track Forward – Take a trip down memory lane through bank statements to see where you’ve been swiping all your cash away and begin to track your current spending.  Please note, there will be an overwhelming desire to kick yourself when you see the truth.
  • A 21 day All Cash NO Credit/Debit Fast – This will be an eye opener because living with cash gives you a better idea of what you’re spending.  Letting the cash go won’t be as easy as swiping your card. This will feel very uncomfortable at first but it’s your first step towards financial discipline and eventually financial freedom.
  • Create a Budget with Real Numbers and All of ThemThe budget has to have real numbers, not the ones you keep in your head.  It also has to have every single item you spend money on including quarterly and annual expenses that always seem to come as a surprise (ex. birthday’s and Christmas).

Step 3: Learn the A.R.T of Borrowing Wisely

(A) Amount – Borrow the least amount possible for what you need.  I’m sure the 200k house would be really impressive to your friends but, hello it’s only you and your dog, Scruffy. Who is going to furnish, heat, and cool all that empty space?   

(R) Rate – Borrow for the lowest rate you can get.  Now this doesn’t sound like rocket science, but more commonly people make purchases based on the payment never having a real understanding of the rate they are getting.  If you’ve ever purchased a car you will notice the salesman always ask, “How much do you want your payment to be?”.  The salesman doesn’t want you to focus on the rate or the term of the loan, which determines the total cost of your loan.

(T) Term – Borrow for the shortest term you can afford.  The term “afford” means living on a reasonable and at least halfway sensible budget not filled with eating out daily or $5 coffees every morning.  Remember when you borrow money you are banking on a future you cannot see.

The Road to Freedom… Living & Loving the All Cash Life

Rhonda Williams

About the Author

- Ms. Williams has been teaching and encouraging clients, peers and her family in the area of personal finance for more than 10 years. Ms. Williams is known affectionately as the “All Cash Queen” among her peers and family. As a certified financial counselor, Rhonda brings a wealth of knowledge, expertise and experience to her audience.

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Did you know?

African Americans are significantly more likely to have some type of debt (94%) compared with the general population (82%). Credit card debt, student loan debt, and personal loans are all significantly higher in the African American community.

Source: Prudential’s 2013 "African American Financial Experience" study