I want to share a cautionary tale of a shady past filled with overdraft credit lines, a myriad of checking accounts and an income that was allowed to trickle into cracks, crevaces, bookstores, eating establishments and hardware stores. The moral of today’s story: Credit is not a replacement for sound financial planning and budgeting.
You think you’ve got your accounts wired appropriately, you’re having money direct deposited from your paycheck into you bill paying account. You’ve got some money flowing to your household account. You’ve got some money going directly to your credit union to pay on your truck payment. Sound familiar? Well who’s minding the store then? The overdraft credit line. That’s right. You think you’ve automated your finances, but you haven’t. Your merely playing a shell game with your money, and the funny thing is you never really check what’s under the shell probably because you don’t want to know what’s under there. And why would you need to, if you are off in your estimating your credit line will pick up the slack. What about if your wife spends too much from the household account? Not to worry as that has its own credit line as well. At the end of the year what have you got? Eight thousand dollars of additional debt and you can’t even identify what it was for.
Debt as a Crutch
It’s so easy to fall into the lie that you can just use credit cards, or credit lines, or home equity loans to help you budget when what you really need is: A budget! I too have been there, rather than spend some time each week or month managing my money I allowed these “tools” to help me manage our money and we’d take care of it the next time I got a bonus, or sold some stock or someone died. Funny part is those days never came. Or if they did there was something else more pressing like a new toy. Like most things in life, there are not any shortcuts; a little discipline, some knowledge and some basic “tools” are all that’s needed to right your financial ship. If you ever hear someone tell you that the way out of debt or to plan for your future is more debt a liberal application of fist to face is called for.
First things first you need to know where you stand and that involves looking at your bank statements and getting a budget together. I wholeheartedly recommend the zero based budget as a tool for giving all your dollars a job. As part of that process if you discover that you are buried under a mountain of debt, the right tool for the job is the debt snowball or one of its offshoots.
You can find resources to help you with that in the cornerstone series here at FiscalGeek. The cornerstone series is focused on those aspects of personal finance that are critical to winning with your money. This includes topics such as budgeting, debt reduction, debt snowballing and retirement. Articles include:
The Debt Snowball Saved My Marriage: Spreadsheet Tell-All
Zero Based Budgeting – A 3 part series on the Zero Based Budget.
Calculate the True Cost of Debt
There is No Time Like the Present
The time to begin is now. If you are already managing your money and are looking forward to a comfortable retirement “Way to Go!” Or if you are like millions of others hoping for something magical to save you from growing old destitute then there’s no time like the present. Let me know how I can help, and join me in my Journey to Financial Freedom.