Debt, Debt, Go Away! (Part II)

Hmmmm….as I was creating my prior blog (Debt, Debt, Go Away! Part I), I thought I had so much to say that I decided to write a 2-part blog on the subject.  But recent life events and experiences have made me rethink the whole subject.  To be honest, as I reread Part I, I’m a bit embarrassed by how "textbook” it all is.  And how naïve I was to believe a few bits of advice could make people’s financial problems disappear.  So, if you’ll stay with me, I hope to do better this time!

What changed my perspective?  In part, a wonderful lady I met recently.  She told me something very clever.  She said, to her, getting her finances in order and reducing debt was very much like trying to lose weight.  We’ve all read about “how” to do it (or we watch Suze Orman religiously!), but actually putting that information into practice is really, really, really hard!  How right she is (about diets AND spending)!

So, now that I have been enlightened, I offer additional thoughts for those of you who might need a little help getting started. 

First, take time to sit down and really analyze your situation.  Record your monthly income and compare it to your monthly expenses.  Honestly, a lot of people are really surprised when they do this.  And it’s an imperative place to start – you need an honest assessment of the extent of your financial issues. 

Want to be shocked?  Summarize the cost of all the bank fees, credit card interest, and late fees you paid in 2011.  If this doesn’t get you motivated to change, probably nothing will.  I did this for a client recently and it REALLY put things in perspective.  Often, many of these fees occur because we’re being lazy – if we were more cognizant of the effect of our behavior, we wouldn’t do it!

The second piece of advice is similar to weight loss plans.  Prioritize areas that need improvement and pick a few “easy” ones to tackle first.  Take one small step at a time.  Something as simple as changing the type of checking account you have can save hundreds in fees each year.  And most banks won’t require you to change anything about your checking account, except the type of account, so you don’t need to worry about any “autopays” already established with that account.  Just be sure, again, to be honest about your spending habits.  Obviously, if you use ATMs all around town to obtain cash, you wouldn’t choose a checking account
that has no monthly fee, but charges $5 for each ATM withdrawal!

Third, get off mailing lists and email “special offer” lists!  This might sound ridiculous, but seriously, how many times are we taken in by an offer we just can’t pass up?  If you’re truly serious about reducing your spending, it’s a great way to curb the emotional and spontaneous spending.  Most of us know, anyway, that we can always find a coupon code for an online purchase when we need one.  Why suffer through all the great offers in our inbox every day?

Fourth, check with your bank to see if it makes sense, and you’re eligible, to refinance or modify your mortgage.  Friends, family, and neighbors usually don’t
share personal financial positions with each other, but I’m here to tell you,
through my experience with several clients, that many people have mortgages
that are completely “outdated” (high interest rates, interest-only mortgages,
etc.).  For these people, a refinance or modification could save hundreds each year.  There are also new government programs recently announced to help people who are “under water” with their mortgages.

Finally, some of my advice from my prior blog still holds true.  Ask for professional help if you need it.  Heck, think of all the fitness clubs personal trainers out there to help us lose weight.  There are also people out there to help us lose debt!  If you missed my last blog, a few examples are Daily Money Managers (see www.aadmm.com for a list of some near you), credit reduction organizations (for example, Consumer Credit Counseling Service), and Financial Advisors.

I hope this helps.  I really, truly am passionate about helping people rise from their money woes and would love to hear some success stories!!!!  Thank you!