My last article about getting out of debt spoke to the idea of attitude. Without the right attitude, we’ll go nowhere fast. As promised, I’m going to share with you some of the techniques I used to extricate myself from a world of debt (including consultation with a bottle of wine).
I’d like to get down to specifics about how I put my attitude to work and the results I obtained. These techniques worked well for me in my particular situation. Of course, what worked for me won’t necessarily work for others, but it should be worthwhile getting these techniques out in the open as examples to see if they might work for you.
I’m throwing these ideas out there; if they don’t fit your style, feel free to do the same…meaning, throw them out. 😉
Instead of telling a story about how I rescued myself from debt, let me simply highlight some techniques I used in roughly the order I implemented them. In that way, you might be able to see each technique as a tool. If you like the approach, feel free to add it to your toolbox.
Let’s dive in.
As you’re aware, the first thing I did was recalibrate my attitude so I was ready to take on the challenge. I was staring down the barrel of a large financial obligation, so I had to get serious if I was to resurface from this quagmire of irresponsibility. It took several years, but I was finally thoroughly disgusted to the point where I had the motivation to change my bad situation into something better. Based on positive results, I stayed with these techniques and eventually created something very good for myself. Being a practical guy, I focused on the big chunks first and foremost. Recognizing that one can only save the most where one spends the most, I plugged the largest holes in my financial boat first. I had two large financial holes to plug, so my first three actions were the most radical, decisive and immediately beneficial. The last two actions I took provided the highest long-term benefit as I worked my way out of debt for good. Here are the six techniques I used:
- Since my financial downfall was achieved with ample “help” from others, I deliberately ended or set aside relationships that were parasitic or distracting in nature…the financial tar babies in my life. In my case, they were people flailing about in deep financial water, pulling me down in the hopes of keeping themselves afloat. They were irresponsible and therefore “needy” and I was the enabler. They were counting on me to support them and therefore they had little interest in supporting themselves. They were a monkey on my back that I was feeding. To solve my problems, I broke off relations with one financial tar baby after another, in rapid succession. If I was going to get back in good financial shape, I had to plug the holes in my financial boat, and that meant I needed to toss overboard those who were drilling holes in my hull.
- I reluctantly filed bankruptcy. This gave me the breathing room I needed to recover. Yes, filing bankruptcy leaves many of your creditors in the lurch, but sometimes you simply can’t drain the swamp when you’re up to your ass in alligators. I had sequenced things properly, first I got rid of individuals drilling holes in my financial boat, and then I plugged up the leaks with a bankruptcy case. In this way, I regained control over my financial ship and stayed afloat, back at the helm and making much better decisions. I still had well over $100,000 of debt to pay off, but now I had some breathing room so I could do it.
- My next move was literally a relocation…to one of the states without income tax. This is something that few people think about and even fewer people do. Moving to a tax-free state provided a considerable advantage to me. It saved me between $600 and $700 a month. Think about it, that’s $20 to $25 a day. For many people, that kind of money — kept in your own pocket — can pay for food and utilities for a month. For me, it paid for my apartment, phone and food each month. It was well worth the cost of relocating 1,200 miles to achieve that kind of sustained savings in one of the states with no income tax. It was very much like depositing my entire take-home check in the bank, as I was able to provide nearly everything I needed with the money that I had previously been paying in state income taxes. Until you do the math, you might not have any idea of how much of your income is going down the government drain.
- When I arrived in my new state, I downsized to an apartment with all utilities included in the rent (except telephone and Internet). This all-in-one package saved me the cost of deposits and the hassle of monthly bills from various utilities. I was not at all pleased with the idea of living next to and on top of others, but you do what you have to do until you can do better. I considered my renewed life as an apartment dweller to be my penance for allowing my personal finances to get so messed up. For me, apartment life was additional motivation to improve my financial situation so I could improve my housing situation. There are many forms of cheap housing to choose from, it’s really a matter of what you choose to afford. At least for the first stage of my financial recovery, my choice was a small apartment.
- If you think moving to a tax-free state is a rare move, I topped that by starting my own enterprise. When I looked at the bills I had piled up in front of me, I realized that I couldn’t possibly make enough money at my current job to pay for them all, so I sat down to think about my options. With the help of a little vino, I soon reached the conclusion that I needed to make best use of my skills and experience, and my network of associates and customers by starting my own enterprise. It was something that I should have done years earlier, but sometimes it takes a pressing need (and a little wine) to push you over the top. My pressing need was a tab that I couldn’t pay with my current salary. By starting my own enterprise, I eliminated the overwhelming majority of overhead my company was charging my customers and doubled my own salary…almost instantly. I was able to make twice as much money and still offer my customers a reduced billing rate, so everyone was a winner. It was a good deal for everyone except my previous employer, as they lost an entire business sector when I left “the mothership.” Could I run a small business on my own? Of course I could. Would I be successful? I had to be. It was sink or swim.
- My last technique was to put my nose to the grindstone and work all the hours that I possibly could so I could generate as much income as possible. Work had always been a big part of my life, but now it was even more demanding on my time. I had very little free time as I piled on the work and spent much of my time servicing my customer needs. My travel schedule often had me on the road 75% of the time. It wasn’t uncommon for me to arrive home very late Friday night, do laundry on Saturday and enjoy a few hours around the house, then hop on a plane on Sunday so I was ready to start work for another customer on Monday morning. During one particular travel period, I provided service to three customers, including a customer overseas, and that meant I didn’t set foot in my house for five weeks. It was tough, but it was necessary, and I didn’t throttle back until my debts were far behind me.
Looking back on what I did to get myself back on my financial feet, I’m still convinced it was the best course of action for me. The only thing I would have done differently relates to timing…I would have taken action sooner. My biggest failure was letting things go far off track, but then sometimes you have to get to the end of your rope before you become sufficiently motivated to make decisive changes for the better. There was always doubt in my mind whether I was going to make it, but then there wasn’t any doubt that failure to act in a deliberate and decisive manner would lead to less than satisfactory results.
If I were to summarize the techniques used, I’d describe them as:
- Recalibrate your attitude for success
- Shed unhealthy relationships
- Obtain breathing room through bankruptcy
- Reduce your tax burden
- Minimize your cost of living
- Harvest more income through new sources of employment
- Get serious, stay on it, and see it through to completion
Could one or more of these approaches work for you? Only you can make that determination, and much of what might work depends on your specific situation. In some cases, you might need to think about doing something out of the ordinary, like relocating and redefining your lifestyle. For most of us, if we don’t do something different, we’ll end up with the same results. That makes sense to me.
From my perspective, getting out of debt requires doing things very differently…often by reversing or unwinding the steps you’ve taken, or reverting to a more austere lifestyle, much like what you might have lived when you first started out on your own. The entire process can be unnerving because of all the unknowns, but I’d much rather face the unknown with hope of success than continue down a familiar path that leads with certainty to more financial mess. Making big changes can turn your life on its ear, but that sure beats having indebtedness and all that comes with it, as it can turn your world upside down and cause you to to be in a constant state of scrambling to react to relentless demands on your time, energy and emotions.