In this post – the second in a series of posts about credit card debt, we explore why having “dumb debt” is not ideal, and how to begin the process of becoming dumb debt free. The very first step to becoming dumb debt free might be slightly different to what you imagined.
Photo by Brooke Cagle on Unsplash
As we talked about in depth in the first post in this series, having dumb debt is actually a symptom. It’s a symptom of a behaviour that we really need to address if we want to have abundance in our lives: instant gratification.
As that behaviour stems from some quite primitive psychological responses, it’s not just about stopping cold turkey. We are trying to change a lifelong behaviour that is rooted in survival!
So the very first step in becoming “dumb debt free” isn’t what you might think.
It’s not just a change in behaviour
Because we acknowledge that it’s a major behavioural change, we need to first change the behaviours that lead to us incurring credit card debt in the first place.
If you have credit card debt, it’s likely because you’ve been spending more than you earn every month.
For some people this overspending may have been occurring for years. The growing debt has been quite subtle, so it hasn’t been much of a bother.
It’s a bit like overeating – you may put on a little bit every year, not so much that it bothers you, or anyone notices. But then you see someone from your past who comments on your weight gain (yes this happened to me! It was horrible!).
It’s the same with your credit card debt, it’s been creeping up and creeping up and then…
BAM… you become a parent. And all of a sudden, you’re using more and more credit until you just can’t avert your eyes any more.
You’re spending more than you earn
But the point of it is – you’re spending more every month than you earn.
But you’re between a rock and a hard place right? Your expenses are what they are, and you’re not going to starve your family. And your income is what it is, and you can’t work more than you are.
The mountain is bigger the lower you are
Let’s look at this holistically and imagine that becoming financially abundant is like climbing a mountain.
The height of the mountain varies from person to person. The super rich have Mount Everests, but you and I might have a modest Mount Cook (New Zealand).
We’re all looking at the mountain and we can see that many people have made it to the top already. There are people at various stages up the mountain.
For those of us who have dumb debt, we’ve been busy digging holes – some for much longer and much deeper than others.
We still want the same as everyone else looking at that mountain. We still want financial independence and abundance. But we’ve dug a hole and that means we are lower down than everyone else.
Because we are deep in that hole, we actually have more distance to cover to get to the same point as everyone else.
Someone with no dumb debt just has to climb from sea level, and they get views as soon as they start climbing.
For those of us with dumb debt, we are in the hole. The deeper the hole, the less we can see, and the further we have to climb to get to the top.
It kinda sux.
What would you do?
You’d try and climb out of that hole wouldn’t you?
But let’s take it that one step back and not even think about climbing yet.
What you actually need to do first, is stop digging.
It’s the smallest yet most valuable action you can take. Stop digging that hole, stop spending more than you earn, stop seeking instant gratification.
If you at least stop digging today, you’re going no deeper.
However if you keep digging, you’re going to go deeper… and deeper… and deeper.
You need to stop digging the hole, today
So yeah, you have to stop digging, preferably right now.
What exactly does that mean in terms of your dumb debt?
- Stopping digging = stopping incurring more dumb debt.
- Stopping digging = stopping spending more than what you earn each month.
As soon as you stop digging, you can say “that’s as low as I will ever go”.
If you don’t stop digging, you don’t know, or can’t really say how low you will go. You don’t know how much more distance you’ll have to cover, to get back to (at least) sea level.
But even if you’re ready to look at the behaviours and habits that have lead you to incurring dumb debt, do you know what you have to do to stop spending more than you earn?
How will you adjust your finances so that you only spend what comes in?
Do you know what areas can give, and which can not?
Next – Getting visibility
The only way to truly understand where your money is going, and to have the ability to adjust, is to get total visibility of all of your expenses.
That’s one of the things we’ll explore in the next post.
As always I’d love to hear from you – do you know where your money goes, and do you have the ultimate power of making adjustments easily, so that you can wean yourself off credit? Or is it like a black hole, with money coming out of multiple cards, untracked expenditure everywhere?
N.B. The last post generated a lot of discussion in a few different Facebook groups about using credit cards to earn rewards. I became aware of a few people that smartly game the system so that they earn high credit card rewards but don’t pay any interest (as they pay the balance off every month).
While this sounds great (free money right!) I also found some of these people didn’t have any kind of significant cash savings for emergency back ups. Their back ups were their credit cards / mortgage. This is the point I wanted to make in my post when I talked about credit card rewards hooking us on credit. If the shi* goes down, who has your back? Your credit cards. Lenders know this. And they will happily take your money when they become your fallback when you’re in the financial poo.
Nothing is truly for free and I hope that I’ve enabled people to think about this from an alternative perspective – despite making people feel really uncomfortable about it in the process!
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