In last week’s post we covered what a Debt Weakness is and what my debt weakness is (0% financing on credit cards). I asked you to try and figure out what your debt weakness is to help get you out of debt and hopefully you have done some thinking.
Identifying this weakness is paramount to helping you get out of debt. 0% interest credit cards have always been my weakness because they are such a smart and great use of a credit card, just not all at once. I would always use 0% financing because then I didn’t have to pay cash for it and I always figured that I could afford the monthly payment. Well after having 7 credit cards used up for 0% financing and at least $1,000 on each, I figured out that this is what was keeping me in debt. Those payments add up per month as well. It was several hundred dollars a month that I could have been saving or investing but instead I was putting it toward debt.
While we’re waiting for Death to Debt for May (due out Friday!!) I figured it would be a good idea to lay out some things you can do to identify your debt weakness.
- Determine what you like to use to spend money. This one is easy for me. I love plastic. Even if I’m not using a credit card and just using my debit card I love it. I love the convenience. I love how there is a little more security (cash is gone if you lose it). It works for me. However, I’ve been considering switching and trying cash for a little bit to see how it goes. Studies show that people are less likely to make a purchase (or at least not spend as much) if they are using cash instead of a credit card. Cash seems to be harder to part with from a psychological standpoint. It makes sense. I could be just trained this way, but even when I do have cash, I always reach for my debit card to pay for things so I can keep the cash in my wallet. If you are like me then this might be worth looking into. If anyone has tried this before or if you decide to try it then sound off in the comments below and let me know how it goes! Determining what you like to spend money on is our first step down this road.
- Determine why you like to spend money. This is important because many people have a problem spending money to make themselves feel good. I’ve been there and continue to struggle with it. Sometimes I would just go to the store and find something to buy just because I liked being able to buy something. Did I need it? Nope. That’s how I wound up with more than a dozen video games I’ve never played before. So do this. Next time you are at the store pay attention to how you are feeling and what you are thinking as you shop. Ladies, do you want that new purse because you have to have the latest thing? Guys, do you want that new iPad because yours is already 6 months old? Determining why you like to spend money is our second step.
- Determine if you are spending money on things of value. After you figure out what you like to use to spend money and why you like spending money it’s time to figure out what we’re spending money on. As I said before, I have a lot of video games that have not been played because I always just went to the store to buy things I didn’t need just because I wanted to buy something. It wasn’t just that though. It was movies, snacks like candy or Twinkies, and I would even sometimes shop for clothes for no reason if I couldn’t find anything else to spend money on. I was spending money on things that did not create value in my life. Why is it so important to spend money on things of value? Because that “feel good” feeling we get from spending money wears off a lot slower. For example, I am part of the Disney Vacation Club because taking trips to Disney World is something that brings value to, and enhances, my life. It creates memories that I’ll have forever with my wife and with my kids. Studies also show that spending money on experiences like this instead of things will make you happier in the long term because of those memories as well. Anytime I think about a trip to Disney World I get the same joy and sense of value as when I spent money on the trip, only I am not actually spending money! I would now rather put that $30 to $60 for a new video game toward a trip to Disney World or something else of value to me instead. Now, obviously, if video games do provide value in your life then absolutely have at it! Determining what you are spending money on and if it is of value can only be done by you, but really think about it. This is step number 3.
- Take Action! This fourth and final step is the important one. Now it may seem from points 2 and 3 that my debt weakness should be spending money on frivolous things that don’t create value in my life. So why do I still consider the 0% financing my debt weakness? Simple. That’s what was making it all too easy for me to spend money. I’ve always been the type of person that if I don’t have the money I don’t spend the money. I have spent pretty much up to my means before, but I don’t spend beyond my means. Having a 0% financing option for 18 months or more makes everything affordable. That makes it way too easy to spend money for me. So I have made the conscious decision and effort (yes, it takes effort) to not use 0% credit cards anymore unless it is only one at a time and only up to a certain amount. That way I stay out of debt and don’t keep falling for the trap. Step number 4, taking action, is the last and most important step.
These are the steps to take to determine your “Debt Weakness.” Mine is 0% financing on credit cards. For you it may be something completely different. If it is that you spend money on things that you don’t find valuable, then determine what you find valuable so you stop spending money on things you don’t. It could be just a general weakness for shopping that you have. If that’s the case, then just don’t go shopping. If I have a desire for a video game or to spend money just to spend money, I’ll keep myself from Best Buy or Target. My wife is the same way. She wanted a new jacket the other week that we didn’t have the money for (because everything is going to debt) and if she hadn’t had gone looking then she wouldn’t have desired it. If your debt weakness is not paying attention to how much you’re spending then it’s time to start keeping track. Some people get paid and then don’t look at their bank accounts or check register until they get paid again. That’s far too long to not know how much money you have.
Use these 4 steps to determine your debt weakness. Doing so will not only free up some money that you can now put toward debt, but when you do get out of debt, you’ll be able to stay out of debt. Like I said, I’ve been debt free a couple of times over the course of my independent financial life but thanks to 0% credit cards I’ve never stayed that way. This time I am determined to stay that way and I WILL do it! The May edition of Death to Debt will be live on the 15th at 9am!
Have you been able to determine your Debt Weakness yet? Sound off in the comments below! I know others, including myself, will be able to learn from your experience as well