Many people (me included) are in denial about how much their spending contributes to their debt problems. It’s what I call the debt spending disconnect. Basically that means while we know that spending money can lead to debt, when we are standing at the checkout with a bunch of new purchases, we don’t think about it. And later when the credit card bill comes in it’s a shock that we have spent so much.
I think it happens because people don’t believe that the small purchases can really make you poor but in reality it’s that $5 there and $15 here that are the killers in putting us in debt. Those small purchases add up quickly and pretty soon we’ve spent $200 in a week on stuff that many times we don’t even have anymore because they are highly consumable: snacks, magazines, coffee etc.
So how do you stop this? How do you get out of debt fast and fix your bank balance in the process? Well there is one radical solution: Stop Spending!
Stop Spending? Are You Crazy?
I know, I know it wasn’t what you wanted to hear. But stay with me here.
What if you only stopped spending for one month? Could you do it for that short a timeframe?
Stopping spending on anything unnecessary is a good way to stop the debt spending disconnect since you really have to think about every purchase that you make. It allows you to really see how much of your spending is automatic and a habit, and how much of it you actually need.
In reality we really only NEED to spend money on food to eat, shelter (rent/mortgage), utilities (gas/electricity) and basic clothing (which you probably already have). You really don’t need anything else to live comfortably.
By going bare bones survival mode for one month you can potentially save quite a lot of money that will help you get out of debt fast or save up for something special that you actually do want.
Ok, so say you’ve done a 30 day spending detox and have saved $1,000 in a month (fairly typical).
What’s the best way to tackle that debt?
I personally think you should pay off the lowest debt first. Yeah I know most people say to pay off the highest interest rate first, but I think the psychological benefit of knowing one debt has been paid off is much greater benefit that saving a dollar or two in extra interest.
Plus it helps boost your confidence that you can tackle the debt and spurs you on to try and save even more money so you can kick the debt to the curb faster.
Getting out of debt can be tricky if you owe a lot of money (Wikipedia says the average credit card balance in the US is about two grand per person) but taking it one step at a time is the key.
Also rewarding yourself each time you make a milestone (like paying off an extra $500) with a non-monetary reward can help you focus on what you are gaining rather than what you are giving up.
So that’s my simple plan to tackle debt. Stopping spending. Come on, it’s the simple plans that work don’t they? And if I can do it you can too.
And it’s just for one month right? You can do anything for a month. Go for it.