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The US government is spending borrowed money into oblivion; the debts will never be able to be repaid. Whether it is default, Venezuela-type inflation, or both – we’re all going to suffer the consequences.

Chuck Butler recently discussed how inflation, and losing the dollar as the world’s reserve currency, will impact everyone’s standard of living. Some will fare better than others.

Chuck concluded with:

“Get out of debt as soon as you can…. I can’t stress that enough…being debt-free will help keep a roof over your head and some control over your life; you’ll fare much better than someone with big debt and servicing costs….”

It’s no fun writing about the failings of government, 5 banks controlling over half the nation’s wealth, and the top 1% share of wealth growing exponentially – while the rest of us lose buying power and see our standard of living decline.

When Chuck encouraged me to start writing 9 years ago, he reminded me to continually share my life experiences, trying to help readers through the choppy waters.

Lately, implementing his advice has become a real challenge. Sure, we can suggest readers buy gold, inflation protection assets, and hunker down – but – is that enough?

Getting out of debt, not renting money is the biggie…. The day Jo and I became debt-free was a major milestone; changing our lives and stress levels forever. Yes, we really did feel more control over our lives.
 

A challenging process

I’m reminded of the Oscar Wilde quote, “Experience is the hardest kind of teacher. It gives you the test first and the lesson afterward.”

Suggesting readers get out of debt, reminds me of my annual physicals. First thing, get on the scale and realize I’d gained 5# from the previous year. The doctor would urge me to lose weight and give me a diet that I’d follow for a few weeks before giving up.

I’ve never forgotten the critique at the end of one of my seminars– “Lose some weight fatso!” Whoever wrote it was right, obvious every time I looked in the mirror.

Suggesting readers become debt-free is like telling fatso me to lose weight. I knew what I had to do, but lacked the willpower, or a reasonable blueprint on how to get it done.

Today I want to share some “debt experiences” that turned into lessons– that I wish I had learned much earlier.
 

Today’s obstacles

America’s Cup winner Dennis Connor began his book, “The Art of Winning,” with “committing yourself to being committed.”

It starts here. Too many times I promised to try to save some money, which lasted as long as most New Year’s resolutions.

Chuck and I are warning all who listen to take heed, that storm clouds are on the horizon. Unfortunately, high-falutin statistics can be vague, and easily ignored. I’d get under financial stress, “Just get the bills paid; worry about retirement later.” I felt like I was on a debt treadmill, “racing to beat the heart attack.” My biological clock finally got to me and I realized things needed to change.

Today it’s different – the tsunami of out-of-control government spending and debt is in motion; our personal biological clock is no longer relevant. As Chuck said, “Get out of debt as soon as you can.” No matter what your age, it’s your personal high ground, you will survive the storm and fare much better.
 

Alarming stats

Household debt, fueled by artificially low interest rates caused consumer debt to skyrocket. Total credit card debt alone surpassed $1 trillion. The majority of Americans owe more on their credit cards than a year ago.

The Mises Institute reports, “Yet Another Recession Red Flag: Net Saving Is Negative.”

Reports show average credit card debt as $10,263. Credit card delinquency rates are hovering around all-time highs. The average interest on credit cards is at 27.8%. Banks love it.

Do the math. The average credit card holder, carrying over a balance adds almost $250 to their debt each and every month.

Earnings are not keeping up with inflation. Savers are having to tap into their reserves to pay their bills.

How the hell is the average American going to reverse the trend and get out of debt? Can it even be done? In a word, yes!

The process is not easy. It’s like changing the direction of a huge freight train, requiring lots of energy, staying on the right track, and a long period of time – but it can be done. You can remove the bonds of debt slavery, but it may take some time.

Where to start? What’s the process for getting out of debt?

Commitment. Easy to say; tough to implement. If you are married, both spouses must be truly committed. Getting out of debt must become a top priority, something has to change. It can, and will work if you build a financial plan together. Without a workable plan, your commitment will fade away.

Accountability. Accept the challenge. List your current debts, monthly payments, the life of the loans, and interest rates. Calculate how much each debt is costing you in interest – rent for other people’s money. While debt may be the money of slaves, interest income is the money of the master.

Get angry when you add it up. Personal debt is consumption in advance, with the lesson to follow.

Next, calculate your total income.

Keep an honest scorecard. Using your checkbook and credit card statements, categorize all your expenses for the last two years. Where did you spend your money?

Personal tip. Don’t play “gotcha!” Telling your spouse, or being told, “You spend too much money on this” will derail the entire process. At this point, you’re calculating where your money went. You can’t change the past, bite your lip.

On the positive side, embrace the experience. It may be emotionally challenging, but I’ve seen it become one of the most positive bonding events of a marriage.

Do a realistic, honest budget. This can be hard. The credit card generation has been brought up to believe that if you want it, just charge it. A budget sets limits, accountability, and discipline.

Compare your income to your budget. How much is left over? This is your true disposable income, to help pay down debt.

Personal tip. Begin the process with each spouse looking for five ways you can save money – not telling the other how they should save money. This will reduce a good bit of bickering. Be realistic, you want it to work, not a source of constant stress.

One thing very important to my wife Jo was having her nails done. She volunteered to stop. While it would save money, I understood what it meant to her. Let’s find other ways.

Prioritize your debt elimination. High-interest debt should be the first in line. Reduce the rent (interest) you pay for other people’s money. Decide which credit cards to keep and which ones to cut up. Those that remain should offer rebates for paying off the balance monthly.

Personal tip. Daughter Dawn went to a personal finance class in her late 30s. She shared a profound lesson. “Dad, to be happy you have to make a decision. If you want more ‘stuff’ and don’t have the money, then get a better job and earn more. If you can’t, or prefer not to, then learn to be satisfied with the ‘stuff’ you have, don’t fret about others who have more.”

She and her husband built a plan together and realized it would take them a few years, but they did it, living comfortably within their means. Each time they cut up a credit card, they celebrated over a nice dinner.

Know your emotional limitations. As the primary breadwinner, I was tasked with determining what we could afford. I realized I was the problem; if there was money available, it would burn a hole in my pocket. To throttle my impulse buying ability, we made extra house payments, with less money available.

Don’t get discouraged. All personal plans will encounter obstacles. When it happens, work with your spouse and make adjustments. Seeing debt come down provides very positive motivation. There is light at the end of the tunnel. Stick to the plan, you will get there.

Don’t forget the saving side. With 401k and IRA programs available, take advantage of compounding, and don’t wait to start making contributions later. If you can’t afford to make your full contribution today, every time you get a raise, increase your contribution until you get to the maximum. If you change jobs, roll it over, don’t take the money out. You’ll learn to live on the rest.

Personal tip. It’s well worth the effort. I’m confident being debt-free added several happy, financially stress-free years to our lives.

Factors beyond our control may reduce the standard of living for everyone. The basics of life are food, clothing, and shelter, Starbuck’s doesn’t make any list. With a roof over your head and debt under control, you are prepared for the worst. Some survived the great depression and thrived; you want to be one of them.

As Chuck said, this is a win-win proposition. If the tsunami doesn’t occur, being out of debt sooner than later reduces stress, gives you more control over your life, and gives you plenty of fun choices down the road.
 

On The Lighter Side

Soon after Jo’s knee replacement, we were both flattened with horrible colds that have been persistent. While she is walking well and can bend her knee, her rehab has been thrown off schedule.

I’ve been hammered with fatigue, side effects of my cancer treatment, coupled with significant coughing; my sides are sore. Chest X-ray results were actually very good, so we rode it out. While things seem to be improving a little every day, we will both be glad when this is all behind us.

I’ve decided to take a couple of weeks off and hopefully, we will be back in the saddle shortly.

The famed TV show Gunsmoke ran for 20 seasons, something like 635 episodes. Jo and I have watched a good number of them over the last week or so. Perhaps corny, by standards, but they are still entertaining. Quite a cast of characters.

In the meantime, Super Bowl week is coming up. San Francisco is favored by a couple of points. I read this week that Kansas City has surpassed Dallas as the most hated team in the NFL. Maybe so, but I’m pulling for them.

Pitchers and catchers report to spring training next week; looking forward to baseball getting back into full swing.
 

Quote of the Week…

“Debt, we’ve learned, is the match that lights the fire of every crisis. Every crisis has its own set of villains — pick your favorite: bankers, regulators, central bankers, politicians, overzealous consumers, credit rating agencies — but all require one similar ingredient to create a true crisis: too much leverage.”

— Andrew Ross Sorkin
 

And Finally…

Friend Alex N. shares some clever thoughts for our enjoyment:

• Every time you clean something, you just make something else dirty.
• If you find yourself feeling useless, remember: it took 20 years, trillions of dollars, thousands of lives and four presidents to replace the Taliban with the Taliban in Afghanistan.
• Why is there a ‘D’ in fridge, but not in refrigerator?
• As I’ve grown older, I’ve learned that pleasing everyone is impossible, but pissing everyone off is a piece of cake!
• I’m responsible for what I say, not for what you understand.
• Common sense is like deodorant. The people who need it the most never use it.
• My tolerance for idiots is extremely low these days. I used to have some immunity built up, but obviously, there’s a new strain out there.
• Turns out that being a “senior” is mostly just googling how to do stuff.

And my favorite:

• It’s not my age that bothers me – it’s the side effects.

Until next time…

More By This Author:

When It Comes To Inflation, The Fat Lady Isn’t Even Close
The Problem Ain’t The Cost Of Money – It’s The Cost Of Stuff
Why Are Gold Prices Are Jumping Around? Is Gold Really An Investment?