We are headed out in a few days for a week of vacation! I am REALLY looking forward to it. One reason is that this vacation will NOT be put on credit cards. In fact, there is nothing about this trip that will be put on credit. We have the cash for it.
BUT...this has not always been the case. I can remember the time when we used credit cards to go on vacation, go out to eat, buy furniture, buy clothes, etc. And we accumulated A LOT of debt buying and doing things that we couldn't afford or were, to be honest, unnecessary and extravagent.
This post by Seth Godin pretty much describes how we eliminated that debt. The one thing he doesn't mention is tithing. We never stopped tithing. Why would we rob God of the tithe to pay for debt our selfishness and lack of self-control brought us?
If you are fighting debt - Seth's words are real and they work.
Urgent Personal Finance Advice
If I could only share one piece of personal finance advice to grads or to just about anyone, it would be this:
Only borrow money to pay for things that increase in value.
It's a short list: your business, your house and your education, mostly. Stocks if you're smarter than me. That's pretty much it.
If you have credit card debt, you're in big trouble. Your bank account has a huge leak in it, and it's getting worse. Hence the urgency.
If you have credit card debt, that means that every time you spend money (even cash), you're borrowing money to do so. And so, if you're going out to dinner or buying a new pair of shoes, you've just broken the single most important rule of personal finance. You're spending borrowed money on stuff that is decreasing in value.
This is an emergency. It's an emergency because every single day you wait, the problem gets worse. A lot worse.
My suggestion: Go to defcon 4, and do it immediately. Shift gears to live well below your means. That means:
No restaurants
No clothes shopping
No cable TV bill
No Starbucks
It means:
Take in a tenant in your spare bedroom
Carpool to work
Skip vacation this year
Eat brown rice and beans every night for dinner. Act like you have virtually no income.
The result? You'll save $5,000 to $20,000 a year. Send all of it to the credit card company. Do this until you're debt free, the faster the better.
There. Now you're rich. Now you get interest on your savings instead of paying the bank. Twenty years from now, this emergency action will translate into perhaps a million dollars in the bank, depending on how much you earn and how serious you are.
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