“First we make our habits, then our habits make us.” – Denis Waitley
Today I wanted to begin sharing a 3-part post I call Breaking the Chains of Debt. I know what some will be thinking – “Debt’s a good thing.” or “You can’t buy any large ticket item without debt.” But I’d like to share with you a few simple steps to becoming and remaining debt-free.
1. Decide now to refuse to go further into debt.
Probably THE most important decision you can make to ensure that you break the chains of debt is to decide that you will go no further into debt. You may have many debts now, but deciding to refuse any new debt is the first step toward financial freedom.
2. Find an accountability partner.
If you are married, this could be your spouse. I say “could be” because I’ve talked with couples who are both free-spirited spenders. So they do not make good accountability partners for each other. Their typical response to the question, “should I buy this?” is “Sure, buy two!” If you’re already over your head in debt, you need someone who will speak sense to you when you are emotionally caught up in your next big purchase.
Sometimes a spouse can be just the person to keep you accountable – if they are willing to say “No!” when they need to say no. They do NOT have to become a tight-wad about purchases, but whoever it is, your accountability partner needs to be someone who has your best interest at heart, knows whether you can afford that big purchase or not, and can help talk you through the temptation to go further in debt.
3. Establish an Emergency Fund.
Dave Ramsey would tell say that you need $1,000 in the bank to act as a cushion for life events. Have you ever noticed that when you least expect it life happens?
Part of the problem is that we are not prepared for those events that arise from time to time. The 19 year-old refrigerator quits. The car’s tires wear out. The children grow and need larger clothes before school. Our favorite uncle’s birthday pops up. Or Christmas comes unexpectedly.
The idea is that we prepare for those events that we know will occur on a regular basis. If we just go around NOT planning for these events – one or more of them will catch us “by surprise” before we know it. So why not plan for them? So, as fast as you can do it, put at least $1,000 into a fund that is NOT for your next big purchase, but is there to absorb the shock of the next event that catches you “by surprise.”
When my wife and I first did this, several years ago, one evening she exclaimed, “the refrigerator is making a weird noise, what are we going to do?” I reminded her that we had our Emergency Fund sitting there for just such an occasion and she sighed a huge sigh of relief.
We will continue the conversation tomorrow. Stay tuned.