Matthew 5:26 Assuredly, I say to you, you will by no means get out of there till you have paid the last penny.

In part 1 of this series titled Credit Crisis, I spoke about the clear and evident problem of the debt people have found themselves in. It an overlooked problem in the United States as we live in a plastic economy. The government won’t call attention to it, because it would hurt the facade of a growing economy.  Plus they ran up their own debt, over 20 trillion dollars now.

While the government can kick the can down the road, individuals cannot. Sooner or later the jig will be up and the anxiety and depression around this can become insurmountable.  If you try obtain a secured loan and your credit is in shambles, you will be declined, this means no house or car.  So what’s the solution?  I will attempt to give you some practical keys which hopefully will help.

1. Look at every credit card you have or obtain as a 30 day loan or 60 day high interest loan.  If you extend past 60 days, look at your loan as in default even though the credit card company will not label it as.  This means, whatever you borrow in 30 days must be paid off in full 60 days or at the time of your next statement’s due date.   Do NOT extend past 60 days.

2. Wants and needs.  A real hard look at your wants and needs must be assessed. Is that vacation affordable?  Do you really need 10 pairs of shoes? Do you need more clothes which will be worn maybe once and thrown to Goodwill?  Do you really need to go to that concert or out on the town with your friends?  Do you really need that $50 haircut or manicure every 3 weeks? And other “want” questions such as this need to be ask, because they are not “needs” no matter how delusional your mind might be (sorry to be direct, but it needs to be said-no pun intended).

3. Needs.  If you live in a home or apartment, most likely you have rent due or a mortgage due. This is a need to be paid.  Needs need to be paid first before any want can be had. So let’s go through some more needs.  If you have children, their care is a need, it is ALWAYS a priority but be careful not to give them their wants instead of needs either.  They need to be fed, clothed, cared for, schooling, etc.  They may want a new Iphone or another pair of shoes or to go to college, but is this affordable to you?  Another need is transportation. You need a car to get to work or to school, or a bus token is needed. Many disregard transportation as a need, and then when the $2,000 repair bill comes they are surprised by it.  In the 19th century for example, horses were the means of transportation. The family horses were fed and taken care of as a need to get around, to get into town, for farm work, etc.  They didn’t have the luxury of horse dealerships and a used horse salesman.

Remember to assess always wants and needs, get into this discipline.  NEEDS ALWAYS NEED TO BE PRIORITIZED EACH DAY BEFORE ANY WANTS.   It is a radical change, but it needs to happen.

4. The Cash ONLY Method.  What I used to self-discipline myself from the wants and needs, is using the cash only method, a radical discipline. It is a tangible thing you can actually see. If you have a job, instead of depositing your checks, cash them.

Example, let’s say you cashed your checks for one month and after withholdings you received $1,500.00.  Now go to the wants and needs. Needs need to be prioritized, so rent, child care, utilities, car payments need to be paid first. What you are left with can be used for a want, however by using the cash method, you will see either you are left with enough for those wants and it will determine which want you can actually afford.  If you have credit card bills, this is not a want, but a need, they need to be paid.  So let’s say you are left with $50, are you going to want to go buy a $600 TV or take a $2,000 vacation?

Believe it or not, people lived by the cash method for centuries!  The well-to-do were given lines of credit, but 99 percent of Americans lived just fine by the cash method.  It can be done as it has been done.  The cash method SHOWS you your actual financial picture!  And it shows you how TO LIVE WITHIN YOUR MEANS.

I have been using the cash method for 8 years now. I have survived and you can too!  By using this method, I was able to become debt free in a few short years as well as being able to save money.  I no longer go to a department store to buy one shirt and end up with twelve, I may come home with none if the price does not fit my current cash flow.

I know I know, this is not fun!  But what is your alternative? You can continue on the path you are on, or face reality.  The debt will NOT go away no matter who pays it, you are on the hook for it.  Yes, that means a rich husband or wife might bail you out, but it will come with strings attached.  In either case, if you don’t learn the discipline in your finances, you will just end up again looking for a bail out, and begging for others to help you. If you are like this? I feel sorry for you.

Take control of your debt, do not let it enslave you any longer!