"Money File"-Secrets To Defeating Debt
Wednesday, January 03, 2007SUZANNE PRATT: In the "money file" tonight, if your New Year's resolution is to get a better handle on your cash, you may want to try a new approach to the problem. Here's Eric Schurenberg, managing editor of "Money" magazine.
ERIC SCHURENBERG, MANAGING EDITOR, MONEY MAGAZINE: Does this sound familiar? You earn good money and yet it seems most of your disposable income goes to pay interest on your debts. Well, if it's any consolation, you've got plenty of company, and there are a lot of schemes that claim to help you, from zero interest balance transfers to debt consolidation loans.
But the fact is, they'll only make the problem worse, unless you change the behavior that got you in hock in the first place. Don't count on will power alone. You've got to play tricks on yourself. First, take the credit cards out of your wallet and put them in a drawer. That creates a physical distance between the impulse and the means to buy. In the time it takes you to fetch the credit card, you might just reconsider. '
For extra psychological advantage, make a credit-card-sized cardboard card and put it in your wallet so that you can't grab plastic without seeing it. On that card, write the following: do I really need this? Is there a cheaper way to get the same benefit? What will I give up to afford it? Again, the idea is to inject some reason between you and the animal urge to spend.
As for getting out of the debt you're in, financially, the smartest thing to do is to pay off your highest-interest loans first. But psychologically, maybe you want to start with the smallest ones. Totally wiping out a debt from one or two creditors might give you the mental momentum to finish the whole job. Think of it this way-- living below your means is the new sign of success. Keeping up with the Jones' is so out of date. After all, do you have any idea how deeply in debt the Joneses are? I'm Eric Schurenberg.
