There’s nothing wrong with a coffee out each day, if that’s your treat. Or lunch out once a week, if that’s your thing. Movie night, sports events, theatre, DVD’s, books, games. All good things, in moderation. But if it’s lunch out 3x a week, and take-out coffee twice a day, and dinner and a movie ever week and oh, hey, that’s a new colour of iPod I don’t have, well then that’s a problem. Not if you can afford it, but most people can’t.

I was one of those people who destroyed himself financialy on small things. About 5 years ago, I lived in a medium sized apartment, with one roommate, for 675 a month in Boston. I worked about for almost 2 years, at about 60-70 hours a month and blew it all on coffee, food, junk… I took one vacation (best money I’ve ever spent) but that was it. I wasn’t in debt, but I had nothing to show for it.

I then moved to another apartment to “save money” I lived with 6 people for 375 a month. Guess what? I sank into debt running up two credits cards and even owed my parents well over $1000.00, I stopped paying bills. It was awful. I had blown it. Wow… I thought I was going to save money.

I moved again. Took a nicer apartment that improved my quality of life (675 a month with one awesome roommate) and I started taking care of my finaces. Since moving a little over a year ago, I have payed off $9500.00 in debt. Pretty awesome. All of it was because I started to take care of the small stuff and developed a pattern. I changed my habits. It worked great.

Of course, life is more complex than a simple metaphor. Sometimes you find yourselves in a place where the big things are simply too big to deal with, and trying to implement triage too strictly would prevent you from doing anything at all. Then you need to tackle one or two little things and succeed so you build enough confidence and energy to deal with larger issues.

If you decide to make your own coffee, that is just a change in habit. The day after you make the change, you are only deciding whether or not to maintain that change in habit. Once it becomes your new habit, to me, there is no more thought involved.

The important thing is to take back control of your life, and not be a slave to your debt. To do that, you must minimize spending, not to the point where you’re miserable, but you need to cut back. Mortgage/rent, cable/satellite, cell phone, and other large bills are a great place to start because you can save a lot with little effort, and it would be passive savings from then on.

The next step is to evaluate your spending and find where you can practice active saving. This is where you break your bad habits and form good ones so that you can start your debt snowball (a la Dave Ramsey) or just start paying off your debt period.

For many people, the little things here and there add up, and weigh people down. You need to break those bad habits to start getting rid of the debt. The more money you (think you) have, the more you spend. I mean, saving $300 on rent/mortgage is great, but if you blow it on shots going out every night…

I don’t agree. I think it has to be a lifestyle change for most people or they will never get out of the hole they are in. Most people I know are in debt and much of it is because they aren’t willing to make a change.

I like the diet analogy from earlier. You can lose the weight temporarily (and people do it constantly) but until you make over your whole life, you will end up putting that weight back on. It’s the same thing with finances. You can get out of debt temporarily, but if you don’t change the lifestyle that got you into debt, you will be back there pretty soon.

From what I’ve seen of people, it comes down to 2 major reasons on why they need to overhaul their lives:

1. They don’t know what’s important to them or what really makes them happy, so they throw money and/or time at this and that hoping it will fulfill them. This where my family was before we had our own financial Armageddon. We spent our money either trying out the newest thing for fulfillment or spending money into giving us convenience to help with the time we didn’t have since we spent so much of it out trying to find what fulfilled us. Once we finally got to rock bottom, we had to make lifestyle changes. Big ones and small ones. Almost 3 years later I can tell you that we do have a lifestyle change. We learned, without money, what was truly important to us and we now focus on that.

2. The people who feel the need to keep up to date. These are the people who have a Starbucks every morning, have to buy the latest clothes, need to have the newest gadget, the house in the right neighborhood, and the “in” vehicle of the moment. While none of those things are bad in & of themselves, or even together, most of these people can’t afford all of it but cutting back is simply not an option for them. This runs the gamut of people I know. I know a family that 3 years ago had what many would look at as the perfect life. Honestly, they appeared to be the most put together family with all the right stuff. Today, their home went into foreclosure and the family is split and miserable. It was all because of the fact that they kept spending and spending to keep the lifestyle they felt they deserved. Another family I know is currently like this. They have 2 very young children and neither parent works. Dad lost his job over a year ago and Mom hasn’t worked since before they got married 3 years ago. He’s finishing college and she did in December. They are literally living off the loans he gets and the government. They struggle all the time and worry about how they will survive, but Mom refuses to get a job because she wants to be home with her children (both under age 2) and Dad has stopped looking until he finishes his degree. They also won’t give up their weekly date night at a nice restaurant or they trips to Starbucks or having to buy the newest cd or their cable (because how can you live without BBC America???). It’s so hard watching them crash and burn because they feel the need to keep up when they don’t have the income to do it.

These people need to change their lives for good, not just enough to pay down the debt. The people in category 1 need to stop spending money at everything and start analyzing what’s truly important in their lives. The people in category 2 need to realize that you don’t have to have everything to be truly happy.

It’s late and I’m not sure if that makes tons of sense or if it just comes off as rambling, but I do know this: You can’t put a band aid on a bleeding artery and hope that fixes it. You need surgery to correct the problem. Paying down debt without changing the little things is a band aid when what these people really need is surgery to correct the issues in their lives that cost them to spend so much in the first place.

For me, once I’ve paid off my credit card debt (roll on August!), I’m going to be doing my budget the same way. It’s just that now the money is going to go into saving for a house rather than paying off my credit card.

I wanted to thank you, by the way. It’s the first time I’ve commented, but this blog (and a few others) have helped change the way I think about money. I’ll have cleared $3500 credit card debt in a year, and in 6 years time, I will own a house. Now my idea of fun is to research financial products to work out which one is best for me!