You Can't borrow your way out of a hole

Recently I had a conversation with a friend who moved in with family to pay down all his bills and start over. If you’ve kept up with this blog you’ll know this has been going on for a long time.

He actually moved into his in-laws in December of last year for 4 months (his original goal). He extended it to 6 months, followed by “any month now” he’d be moving out to “I don’t know when it will be”.

What went wrong?

First, he doesn’t particularly like to live with his in-laws. Second, his wife has a large spending problem and doesn’t mind living with her parents. Third, they have three kids who, like most kids, go with the flow.

So, what went wrong?

Well, it started out with the best of intentions. He began paying off bills one at a time and even had a time line for paying off everything even the two car loans. He changed it to paying off at least one car loan and the only bills left would be his truck payment.

A few months into the plan they took a family vacation to Disney land. That was followed up by several weekend get-a-ways (the whole family would stay in a resort to get away from it all)

From that point it became Spas for the wife, golf stuff for the husband.

Every once in a while I’d get updates from him on what’s happening. At first everything was on track and he couldn’t wait to get out of the in-laws house. After awhile it became I’d rather have this or that and I’m close to paying everything off.

By the 6th month he was talking about purchasing a home and how there were such good deals because of the housing market. When I asked if he had saved a down payment he said, “no.”

Have you saved anything? Have you paid off all the bills? Did you begin saving the monthly rent you used to pay out to get used to paying it out again?

All “NO” answers.

Now, it’s we are a few days shy of the eleventh month. All of the bills are not paid for. There is no money saved.

Unfortunately they have now gotten so use to not spending money on rent & utilities the will have a tough time coming up with that money once they move out. In addition, they have not paid off all of their bills (credit cards, car payments) and are now discussing purchasing a new car (on time).

The moral of the story?

If you do not go through some pain it is difficult to change bad habits. They have reverted to spending every dime they make and have nothing saved and plenty of bills to pay.

You’ve got to get mad about your situation. You’ve got to get mad and want to do something about it. You’ve got to get mad and make a commitment to a month, a year, what every it takes to become debt free.

Sometimes life forces you to make those changes. But, mark my words, if you don’t make the changes you’ll continue to live in torture because you’re skrimping to pay your bills. After a while it becomes really aggravating to continually stagger bills every single month just to get by.

Unlike the Government you cannot continue to borrow to live. One day you’ll pay with more than money. Your health, stress, etc.

No pain, no gain….

David Dassow

Part two update next time…

Smart Comments NOT

I get a lot of smart comments from people telling me I’m full of it. Well, I’d rather be full of it for suggesting you go against the grain and being a contrarian than being a conformist, an eighty percent(er).

I admit it’s not cool unless you borrow money. It’s not cool unless you owe money so you can “have it now”. My approach is different to what society tells you. The recent bail out has a fundamental flaw.

The flaw is this notion that consumers and business need to borrow more money to keep the economy going. The reality is you’ll need to pay the money back some day. You can’t borrow forever.

At some point you’ve got to pay it back.

This idea that businesses need or should borrow money for payroll is a bad idea. You have got to be able to maintain your normal bills without borrowing. If you have to borrow for the essentials you’ll go under relatively quickly.

The answer is to change your mindset with a 3 step approach to changing your habits and what society wants you to do and becoming debt free. Step one, stop borrowing money. Just stop it now.

Step two, pay down enough money so you can at least comfortably pay your bills. Step three is to pay off all your debt…and I mean all your debt including cars and your home. If you owe no money you can do what nobody else can do…you can also be generous.

Because CASH IS KING! When you have cash you have power. When you owe money you are powerless. Purchasing with cash is contrarian thinking. But, while everybody else is forced to stop spending because they owe more money than they can pay back you’ll have the ability to do what they can’t do.

The old saying is if you’ll do what no body else is willing to do now you’ll be able to do what nobody else can do later on.

David Dassow