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"A rich man is nothing but a poor
man with money."

W. C. Fields
You Have Got to Believe in Life After Debt

Okay, youíre seriously in debt. Youíre probably thinking about debt consolidation or some other program to help out.

But you may be able to do some small things right this minute that can help you fix your financial picture. Thereís an old saying that goes, ďItís the little foxes that spoil the vine.Ē A lot of seemingly insignificant things are probably what got you deeply into debt. A lot of seemingly insignificant corrections may help you get out again.

Itís an annoying exercise, but just for a week, try writing down every single expense you have. Jot down not just the checks you write, but every charge purchase, every cash purchase, in fact, every quarter you put into a vending machine. Some people recommend doing this for a month, but that depends on how serious you are about taking financial control back. At the end of that time, look at what youíre spending your money on.

Letís look at one of my favorite things to cut: store-bought drinks. Do you regularly stop into the drive-through to get a drink? Do you buy fancy coffee from one of those big chains? If you spend $2 a day, 5 days a week, just buying a soda from the drive-through, youíre spending $520 a year on something pretty frivolous. If you cut out that one thing, your lifestyle would remain pretty much unchanged and youíd have $520.

Of course, you might protest that you have to drink something. After all, hydration is important. But does it have to be soda? Replace those drive-through colas with tap water and youíve saved $520. Thatís actually more than it seems, and hereís why. To buy your fountain drink every weekday, you need to pay $2, but to get $2 in your hot little hands, you actually have to earn more than $2 because you have to pay taxes. Letís say you have to actually work to earn $2.30 to get the $2 you need to buy your soda. That amounts to $598 in a year.

You might say that you hate tap water or the tap water in your area is not drinkable. I admit, going from a daily drive-through soda to tap water is probably extreme, but desperate times call for desperate measures.

How seriously do you want to get out of debt?

However, there are also some intermediate options. What about investing $20 in a water filter, filtering tap water, putting it in a sports bottle and using that? If you work some place that offers water, drink their water.

If you just will die without some regular soda pop, then buy some stuff in the store. Youíd be surprised how much cheaper it is. You could go to the store and buy soda for 50 cents a can (actually, you can probably do better than that). If you have one of these five days a week youíd end up spending $130 on store-bought soft drinks. Youíd still be drinking the same amount of the same beverage, but youíd save $390.

See how this works?

Fancy coffee places are the same deal. If you buy a $4 deluxe coffee drink a day, five times a week, youíll spend $1,040. It adds up pretty quickly, doesnít it?

Now look at other things in your life which, quite truthfully, you could probably do without. Restaurant meals, even at fast food places, cost more than cooking at home, at least if you cook using ingredients rather than prepackaged take-home meals from the grocery store. You can buy a whole chicken and a bag of rice for a few dollars and feed a family of four.

Naturally, you may object that you work hard all day and donít have time to cook. Remember, youíre looking at things to take away and itís up to you how much you want to peel back. Letís say you go out five nights a week. Cutting back to two nights a week will save about half of your going-out-to-eat expense money.

Again, how serious are you about wanting to regain your financial balance?

There are lots of other areas where most of us waste enormous amounts of money. Look into any memberships you might have. If you donít go to the gym, stop paying for it. Cancel magazine subscriptions or donít renew. If youíre in any kind of clubs or programs that expect an annual fee, seriously consider if you need those things.

Get rid of luxuries that are surprisingly expensive. Cable TV can cost you $100 a month (thatís $1,200 a year). Renting DVDs might give you the same (or better) entertainment at a fraction of the cost. 

Then comes the cell phone. Most people I know who are over-their-heads-in-scary-debt have cell phones, and that always amazes me. Chances are you pay at least $20 to $30 a month for that privilege, likely more than that. Do you really need a cell phone? If you think one is a necessity for safety, look into the most radical plans you can find so that you get the bare minimum in security.

Think of your personal care. If you regularly have manicures, pedicures, facials, and get your hair highlighted, you need to re-think all of those expenses. If youíre a model and your livelihood depends on your appearance, thatís one thing. But being bankrupt is way worse than having unpainted toenails.

Figure out how to get basic minimal grooming services (a regular haircut) the best and cheapest way you can and forego all the little luxuries. If you really have to dye your gray hair or hate facing life without tweezed and made-up eyebrows,  buy some drug store cosmetics and do it yourself.

Last but not least, there  is the grocery store. The grocery store is absolutely the great frontier of saving money. Thatís because two families can literally live in the same town and eat very similarly and yet spend differently for the same amounts of the same foods.

At the most basic level, start clipping coupons and shopping sales. 

The next level involves ďpantry shopping.Ē This is where you stock your pantry with items that are on sale by buying in larger quantity when you can get a good deal.

For instance, if chicken is on sale, you make room in your freezer and you buy six or eight cheap chickens. Now this doesnít work on produce, but it works for canned goods, anything that can be frozen, and other long shelf-life items.

Now when you go grocery shopping, youíre not necessarily looking for what to cook tonight, youíre simply hunting out the bargains to re-stock your pantry.

It doesn't take long till practically all of your food is bargain stuff with the exception of perishables, milk, produce, and that sort of thing.

The third level involves doing more from-scratch cooking.

Most of us donít want to cook at all, but cooking from scratch is significantly cheaper than buying prepared items. Even minimal preparation will cost you dearly. For instance, itís much cheaper to buy lettuce, wash it and tear it up than to buy a bag of prepared lettuce. Itís cheaper to buy a bunch of celery and wash and chop it up than to buy the packaged stuff. Same thing with cake mix, mashed potatoes, soup, and all of the other convenience products.

The main objection to scratch cooking is the time factor. Actually, for people who have an organized kitchen and know what theyíre doing, cooking is not much more time consuming than rushing around buying convenience products.

Plus itís healthier, tastes better, and costs much less.

The other objection to cooking from scratch is that it doesn't really save that much. Actually, it does. So do other strategies like washing out plastic bags. You may roll your eyes at that one. But calculate how much a plastic bag cost. Then calculate how much time and effort it takes you to dunk one in soapy water and leave it to dry (maybe five seconds?) Let's say it cost you five cents to buy a plastic bag and five seconds to wash it out. That means for five seconds invested, you save five cents.

Now this is a made up example, but you can do it with real products and real prices. If you need five seconds to save five cents, that means you one second of your time spent in this way brings back one cent. That means your time is worth 60 cents per minute or $36 per hour. Seriously, the going wage on that five seconds you just spent rinsing out a plastic bag is equivalent to the hourly rate of a person who earns $74,880  a year ($36 an hour times 40 hours times 52 weeks).

Most people snicker at washing out a plastic bag. And most people don't value their time at $75,000 an hour.

It's about re-thinking the little things!

Some people have actually found that the money they spend on convenience products, extra services (lawn guy, housekeeper), and child care actually exceeds the amount one adult earns. That means one adult can stay home, raise the kids, cook, and tend to household stuff without having it cost the family money. In fact, it may even be financially wise! And it may be psychologically better for the family and less stressful for the family members!

Other items to re-think services (car wash, oil change, home repair, lawn, household help) and entertainment (movies, concerts, weekend trips, dinner out, entertaining).

This exercise is very personal. You may be willing to start cooking more, but do not want to give up the lawn guy. Or you may be ready to go to extremes but recognize that you simply are unable to do all household repairs yourself, at least not yet. Maybe you don't know how to change the oil in your car. You may have to pay for someone to do this for you until you find someone who can show you how to do it yourself.

The more of these things you can economize on, the more money youíll have free each month. It doesnít take long to see results.

Now donít just take that new-found money and rush to the mall.

Instead, keep it in the bank and throw it with both hands at your debt. Letís say your minimum payment on one particular credit card each month is $240. Letís stay you give up your $4 weekday cappuccino. That frees up about $86.66 a month. Add that to your minimum payment and it will pay off the principal (which is what itís going to take to get you free). Letís say you give up your gym membership ($20 a month), stop your biweekly pedicures ($60 a month) and give up going out to eat one night a week (saving the family $40). Thatís another $120 you have. Now instead of paying your minimum payment of $240 (which will keep you paying off the card for years), you can pay $446.66 a month.

This may seem harshóafter all, if youíre saving money, shouldnít you be able to enjoy yourself?

Thatís the kind of thinking that got you into debt!

You have to re-think what money is all about. Money is all about the freedom to live your life as you see fit. People in debt are slaves. People who know how to manage money may not have all the latest electronic gadgets, but they're running their own lives.

And if they ever decide it's worth it to get an XBox or iPod or other gizmo, they can do it. But they do it knowing full well what it costs. Everything you buy cost you time. You can only work (and earn) so much in a week.

Learn to live on less, and you won't have to work so much. Or you can work the same amount and have more left over to direct into things that are truly fulfilling to you.

People in debt just have to pay off their debts. People who are financially free can decide where they see value and put their money there.

You need to take radical steps to get out of debt and radical steps to stay out. Giving up your luxuries may mean a little hardship or at least change for you, but if you make enough of these changes, you may actually be able to get out of debt.

Once you're out of debt, you have to continue to live with that new mindset (is X worth the cost? Can I do without it?) or you'll just wind up back on the merry-go-round.

Even if you still opt for debt consolidation, these ideas will help you get out of debt more quickly and will be invaluable to prevent you from falling back into debt.

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