Debt isn’t a problem, it’s a symptom.
People who are burdened by debt often don’t recognize that debt isn’t their main problem but rather a symptom of the true issue. Fixing their problems begins with them recognizing this fact thus allowing them to turn their attention to identifying the true causes. According to the late Larry Burkett in his book “Debt-Free Living”, debt problems are generally a symptom of three things. Identifying and correcting these problems will allow one to the treat the lingering symptoms in an effort to overcome their debt.
Read. Listen. Learn.
First, those who have debt problems typically have little to no financial education. It is important to read books in an effort to become better informed. Asking questions of those who are winning financially is important. Working with a financial coach will also lay a foundation to improving one’s financial literacy. Avoid taking advice from those who will benefit such as bankers. Look for resources that will teach a different perspective than what you already know.
Second, they allow themselves to overindulge. They simply can’t tell themselves no. Perhaps they grew up with nothing and now feel the opportunity to have those things they always wanted. Perhaps they grew up around extravagances and believe they deserve to have those same experiences despite having a lower income than their parents. They need to become more patient if they hope to solve their debt problems. Rather than appear to be wealthy, they should take the time to build real wealth.
Create a plan.
Third, they do a poor job of planning. To win financially, it is important to develop a system and constantly work to improve that system. Think of having a toolbox that contains many different tools for many different purposes. A system is a group of plans that guide in making sound financial decisions. Start by developing plans for managing income, eliminating debt, dealing with emergencies, and insuring against loss. Additionally, it is a great idea to have a plan for increasing income both in the near and distant future. These are the basic building blocks of a good financial plan and must be worked and constantly improved to build the best system possible.
Here’s the Bottom Line
Once these three have been addressed, it is important to eliminate all debt. This will take care of the lingering symptoms of the real problem. Create a debt elimination plan, save $1000 for emergencies, commit to stop borrowing, destroy all credit cards, and look for ways to squeeze every dollar out of the budget. Collectively, these steps will create an environment in which the trend of relying on debt can be reversed. Sticking with the plan will allow for the elimination of all debt except the home in a reasonably short time frame.
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