Recently, several readers of The Simple Dollar have emailed me and asked questions about managing and reorganizing their debt. These individuals are trying to find their way through the debt nightmare of the modern world, one that so many of us find ourselves in at some point in our lives. I hear questions about whether or not they should use a home equity line of credit to pay off their credit cards, or what they should do about a huge pile of credit card debt if they don’t have any assets.
I know very well where these readers are coming from. They’re struggling with the vice-like grip that large amounts of debt can place on a person’s life. Every time it feels like they’re gaining ground, something happens and they fall behind again, always behind their credit cards, never ahead of the game.
Although I offer advice to each person that asks, I really want to tell them all that there is one fundamental way to get out of their problem. It’s the same method, regardless of the specifics, and it’s so simple that most people simply don’t believe in it.
All you have to do to get out of credit card debt is spend less than you make. That’s it. That’s the secret of all personal finance. That’s all you have to do. Once you spend less than you make, you can take that difference and apply it to your debts or save it so that when an emergency happens, you don’t have to use credit to save yourself. Then you can begin to invest with security.
It took me far too long to really figure this out. I heard it, I even believed it, but I didn’t follow it until I hit rock bottom. I almost lost everything I had because I really believed I needed to spend all the time. I believed that I needed stuff.
I’ve talked to so many people who have figured out this secret and really integrated it into their lives. The stories are very similar; they spent and spent like a good consumerist, buying more and more stuff, then they hit their own personal wall. After that, they found some book or heard some radio program and suddenly it all made sense to them, and after that, things began to turn around for them.
The people that write to me, for the most part, haven’t reached that bottom yet. They’re still struggling to save rather than just doing it, and they’re more worried about restructuring debt than eliminating it. Sometimes, when I read these emails, I am almost brought to tears because of how familiar their messages are. I know what it’s like to fight against the chains of debt, following an innate belief that everything will make itself better somehow.
The answer to debt problems is simple, but actually doing it is very difficult. The real solution comes from within, and I remember very clearly how painful bringing that solution forth was.