Herman: John L. Herman Jr., Author

Spend less or get more money

You are sinking into the abyss. The debt monkey has climbed on your back and won’t get off. This is the normal course of action for many people who glide through life. Even the ones who try hard to live within their budget. The unexpected expense always pops up and takes you down. The car repair you didn’t expect, the plumbing failure at the house, a medical emergency not covered by the insurance. All things that happen in real life that aren’t always provided for in the monthly allowance you give yourself.

The kids need braces. You like the private school down the street but tuition is steep. You get the picture. And soon, debt has risen above the water line and is starting to drown you. How do you get out of this mess.

There are only two ways to solve a debt problem. Start spending less than usual or start making more than usual. Let’s see if you can’t do both.

Watching BIG SPENDER on TV is painful and educational. People who are intelligent, hard working and who love their neighbor somehow find themselves deeply in debt after long bouts of overspending, or under-earning, however you want to look at it. And the host, Larry Winget, calls himself a “pitbull of personal development” who confronts people with tough love and cutting up credit cards as a first course on the menu to get out of trouble. This happens to millions of people and also to business owners. They hope for a chunk of money to overcome their bad spending habits, and sometimes life gives us those with an annual bonus check, an unexpected windfall or inheritance, or the sale of a property when you move on to another location. But, more often than not there is no chunk of money, just a long road back from near financial death, slowly walking up the pay-back mountain you have created.

You can get a better job and with increased earnings start improving the situation. But usually people who get a raise manage to outspend even that extra money. Starting a business is hard work, and takes money you already haven’t got, so that seems hard too. Steps to rid yourself of this problem are not going to be easy, but they will be forced down your throat at some point in the future and you will lose even more then, so why not take responsibility now and control what you lose and what you get to keep.

Stop charging things immediately. No more debt creation is rule number one. Stop eating out as much and save money by eating at home. Stop shopping for things you don’t need, but just want so you will feel better. Sell the Lexus, Cadillac, or whatever car you overbought and get one that costs less, this can cut thousands or tens of thousands from your outstanding debt, and that less expensive car gets you there exactly in the same amount of time as the money guzzling debt creator you thought you had to have. These three things can be done by anyone. Next, if you can’t start a business or get an immediate raise, start adding to your income and apply that money all to debt reduction. How can you earn that extra income? Start selling every item you don’t need and turn that material anchor around your neck into a lifeboat out of the debt waters. It doesn’t matter how little you get for your collection of bobbleheads, trinkets from trips, clothes you don’t need, or the motorcycle you could kill yourself on anyway…turn it into cash and reduce your debt.

I know a man who six years ago hit the real estate jackpot. His six hundred thousand dollar house shot up to be worth one point five million dollars. He cashed out, bought a new house for eight hundred thousand dollars, and put seven hundred thousand dollars in the bank. Home free for life. He still had a wonderful home in the same area as his old place, his kids still kept the same friends and schools. The boat dock out back was gone, but the seven hundred grand in the bank made him sleep better at night. Six years later his wife decided she missed the old house which was a bit larger than what they had. So she bugged him to buy a new lot and build a new house like the old one they sold. They are now about to spend one point five million to buy the new house, and it isn’t even on the water. Some people don’t know when they have it made.

• Posted: 27 December 2007
• Comments: 1
• Category: Business failure

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