Yesterday, I received this pertinent comment from an anonymous Brother or Sister:
"Hey Rev, I see personal debt reduction as one aspect of personal financial freedom. Another is reducing consumption. Will you enlighten us with your thoughts about this?"
The Rev is, indeed, happy and grateful for the opportunity to discuss these two aspects of personal financial freedom. I thank this astute reader for giving me the opening for this entry, which is what I was going to talk to you about anyway.
I have to liken the idea of less consumption and less debt to the conundrum of the perpetual diet craze. Many of us struggle with a few, or more than a few, extra pounds that we would like to shed. Losing weight, and then keeping that weight off, is a difficult struggle for a great many of our Brethren. We count calories, try to exercise and eat in a more healthy fashion, while at the same time we are bombarded with tempting messages, which tout easy solutions and magic, fat-burning pills. Fad diets tell us we can eat as much as we want and still lose weight. In our hearts, my Sisters and Brothers, we know that these are lies and snake-oil, pure and simple. Yet, time and time again, some of us fall for the temptation and then, as we knew we would be, we are disappointed when we are duped by the allure of the easy fix. There are only three basic ways to lose weight: Eat Less, Exercise More, or Both. That is the hard truth of it.
The Reverend is here to tell you the hard truth, not the soft lie. The same basic equation of weight loss applies to personal financial freedom from debt. The hard truth of debt is that there are three basic ways to break the chains of the demon: Spend Less Money, Make More Money, or Both. To make matters even grittier, I have to be straight up when I tell you that the gospel of a debt-free life is the gospel of making life changes. Of course those three little thing are just a starting point, but here we are at the beginning, so let us start.
There is no easy fix. The Reverend Squeaky-Eye does not have a magic bullet to make your life better. No one does! If some snake-oil salesman comes to you with a program of three step financial freedom that does not include changing the way you live your financial life, know the charlatan for who he is!! This here road that I am telling you about, this Glory Road to financial freedom, it is a hard road. This road is a rocky road, a road without the promise of soft tread or easy travel. And yet, this is the road that has the true reward of breaking out from under the crushing weight of the foot of the Down-Pressor.
Personal Debt Reduction & Reduced Consumption
When I look at these two methods for achieving financial freedom, I see one thing. They are inextricably linked, each either enhancing the other to aid our Brethren or, when increased rather than reduced, bringing our Brothers and Sisters to ruin. If a family takes the cold, hard look at where their money goes, they may see areas where they can reduce costs by buying less, buying more wisely, or not buying at all. Reducing consumption means an increase of funds on hand. A Sister will have more of her hard earned paycheck left in her hand if she spends less. A Brother who wisely spends less of his income has more ability to pay down whatever consumer debt is looming, like a great shadow, over his head and over his family.
Reducing consumption can be viewed as the first step in getting out of the pit of debt. The first thing a Brother or Sister has to do to get out of a hole is to put down the infernal shovel and stop digging. I know that this is a hard thing, I know it is, but I am here to tell you, you have to put that shovel down! In our lives, we can be battered and worn down by the day-to-day struggle of just trying to keep a job. We work hard so we can keep the family fed an warm. That, in and of itself, is no small achievement, and proud I am of all of those who maintain the fight. Sometimes, in the midst of that struggle, we see some small thing that would seem to make us feel better, some small luxury that we cannot afford but we can have, if we only succumb to the lure of gratification allowed by the use of credit. So we acquire that thing, and in the struggle to keep the family cared for, we let that hole of debt get a little bit deeper. It is an insidious process, made more so by the daily barrage of messages that tell us all will be well if we only have this car, or this product, or this hairstyle. It is snake-oil and lies, my Brethren! Put down the shovel and stop digging the hole!
Reducing consumption is a slow and methodical task. Again, this is the hard truth. Spending and consumption are a habit, and like any habit, they are hard to break. We want what want, and we like to have the things we are used to. But, my Brother and Sisters, if these very things are becoming the millstones around our necks, dragging us down, we have to free ourselves. The Reverend believes in the power of a budget. A Sister running a family has got to know where the money is going before she can change where that money is going. Preparing and keeping a budget is not that difficult and it is very illuminating. I have to testify that I keep a budget religiously. I save every single receipt for anything that I buy and I stuff the receipts in a yogurt container (I eat the yogurt first). At the end of the month, I tally up all of the costs and compare those costs to what I had budgeted for the month. A clear picture of the actual state of your finances is the first step towards improving the state of your finances!
Here are some links to easy budge templates that our Brethren can do at home.
Over the coming days, the Reverend intends to offer up specific ideas for reducing consumption, both on the broader plane of the disease of consumption in our society, and in the narrow focus of the nuts and bolts of how a household can cut costs. For today, I am urging you, with all of my heart, to begin to bring the picture of your personal financial world into sharp focus, no matter how difficult that picture may be to look at. We must, all of us, strive for a realistic view of our present financial life before we can make concrete changed to improve that life. Please, take the step of preparing a budget and then tracking your families costs!!
What do we mean when we say the goal is to reduce personal debt? While I acknowledge the immense freedom that comes with a completely debt-free life, I understand that this is difficult if not impossible for many of our Brethren. Not all debt is the same and some types of debt are not as onerous as others. Before we reduce debt, we have to identify it.
Unsecured Consumer Debt is the most pernicious evil that can beset a Sister or a Brother's personal financial well-being. When I speak of unsecured debt, I am talking primarily about credit card debt. When I urge you to reduce the debt that be-devils you, this is the place to start. Credit cards themselves are not evil. The Reverend has three credit cards that he uses for convenience, for travel and for acquiring frequent flyer miles. It is critical to add, however, that every one of these cards has a zero balance at the end of the month. This is not because the Reverend has some higher moral temperament. No, Sisters and Brother, I have a zero balance because I have personally suffered the degradation of being ground under the heel of the Down-Pressor, have been beaten down by the vicious cycle of debt and payment, and I have vowed never, ever, to be under that heel again.
I will tell you a parable, my Brethren. In the credit card industry, a righteous Sister of Brother who uses the credit cards, and then pays them off each and every month, is known, in the parlance of the business, as a "Deadbeat". The Down-Pressor only makes money off of interest, and more and more frequently, off of late fees and other fees that they charge at every opportunity. Remember that to be a "Deadbeat" to these people is a badge of honour to be worn proudly! If you can use the outside financial system to your benefit, I salute and applaud you. Please send in examples of ways to use the system for the benefit of our Brethren and I will be more than happy to post them here!! Remember, it is the debt that is the burden, not the card, provided we have the discipline to wield the card as a tool.
The Reverend Squeaky-Eye, in his call to action, is urging 20% of the people with unsecured consumer debt to pay down 20% of that debt over the coming year. I am imploring you to concentrate on consumer debt first. Credit card debt is at the top of the target list because it does the most harm and is the most insidious.
The next level of debt to be aware of is the lure of the "No Interest Ninety-days Same as Cash" installment loans for purchases like household furniture. These contracts sound like free money until we read the fine print. Remember the words of our esteemed Brother, Mister Tom Waits: "That's right buddy, the large print giveth and the small print taketh away!" If you do not make all of the payments, complete, in the allotted time, the full interest of the contract comes to bear for the entire purchase. Beware, Brothers, beware!
Automobile payments make up the next tier of debt. Many of us have a love-affair with automobiles. The automobile advertisers would lead us to believe that these new cars will make us more desirable, successful and happier. In truth, buying a new car is one of the worst purchases our Brethren can make. And the economic downturn has made good used cars harder to find. The Reverend would suggest that my Brothers and Sisters keep driving the car that they have. Paying off a family vehicle and then continuing to drive the vehicle is one great step toward financial freedom. Not having a car payment is a wonderful thing, not to mention the benefits of being able to reduce the insurance coverage required on a car that is owned outright.
Here is a link on buying cars and the car market in this economy.
Finally, there is mortgage debt. I do not have a great issue with mortgage debt, or the rent that many of our Brethren are paying, simply because we all have to have someplace to live and it is beyond the means of most of us to own our domicile outright. While there are many good strategies for reducing mortgage payments and debt, we will be concentrating, for the most part, on the difficulties of consumer debt rather than mortgage or rental payments.
I want to thank the readers for more great comments than I can address in today's entry. I promise to make note of and to attempt to respond to each comment, whether it be about heating oil costs or the idea of a people's bank, or any of the other amazing ideas and comments that are being brought to the Rev's attention.
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