Americans are addicted to debt. This is evident, as the latest figures show. According to the Federal Reserve Consumer Credit Report, as of April 2009, the average household had $8,329 in credit card debt. This seems to be a downward spiral from which we can never recover. Becoming financially stable has taken the place of the “pursuit of happiness” in the hunt for “the American dream” of yesteryear. This monstrous beast seems insurmountable as it accumulates faster than we can control it…or does it?
There are many ways to confront, admit to, and choose the wisest course to overcome that addiction. We now know that we were indoctrinated, or programmed to adopt the overspending mindset. We also now know that it has become a cancer that has rotted our financial stability from within. By admitting we do know these things prepares us for the first step toward alleviating and ending overspending.
The key is changing our mindset. But, what is a mindset, anyway? According to Webster, mindset is a set of beliefs or a way of thinking that determine somebody’s behavior and outlook.
It can be so embedded that concrete could not move it! We feel it’s ours, what defines us. We’ve gone for years, holding on to it like it was a matter of life or death. That to think about changing our mindsets would be like giving up our souls. It clings so fast to us that it seems to be a magnetic pull over common sense.
The economic crisis has made us realize that our present mindset may not have been such a good concept for us to live by and guard like our life depended on it. We also realize that not only are we in debt but may be jobless and losing our homes, as well. This in itself should be enough of a wakeup call to release the magnet. Here is a before and after scenario showing how to release the magnet and feel elated in the process.
Scenario: Any class family of 4: Before adopting positive attitude adjustment: Breadwinner earns a decent income. And wife’s job allows them more spendable income. They buy a home slightly over what they can afford, thinking that future raises will be enough to cover tax and insurance increases. (By doing this they are spending money they do not yet have). They bought 2 vehicles, slightly over what they could afford. The children don’t want for anything. They have the newest, the best, and what the other neighborhood children have, regardless if the parents could afford keeping up with “the Jones’s” and regardless that the purchases have been charged.
They vacation on a credit card, staying at hotels and eating in restaurants. They care not about the cost, only that they are having fun.
School begins. The cost of supplies, clothes, books and other incidentals are charged on a new credit card because their other credit card balances are maxed out.
Christmas is just around the corner, when wife is laid off. Then husband’s vehicle needs an expensive repair. A child gets sick and needs medicine.
Husband and wife never thought about have a nest egg to protect the family in case of emergency.
Their world begins to crumble. Payments are late. Stress is unmanageable and sleepless nights interfere with husband’s job. They may loose their home, their cars, everything.
Same family of 4 after adopting positive attitude adjustment: Husband earns a decent income. Wife works, but not to have a higher living plane. She saves almost all her income. They have an eight-month salary nestegg for emergencies. They make due with 1 vehicle. They bought a home below their means and bank the difference, had they bought a home slightly over their means. The extra money is saved for college, retirement or that special dream get-a-way.
They vacation by camping out, where the kids meet new friends. When they “need” things they pay cash. When they get a credit card bill, they pay the full balance every month.
They realize what children need most is family security, not overwhelming debt that can destroy the entire family.
So, by having positive attitude adjustment as a lifelong companion…(you finish this sentence)
Sunday, February 21, 2010
Wednesday, February 17, 2010
It’s All in the Mindset
So… where do we start and how can we mend our ailing financial habits?
First, go over, in our minds, and then write down what had prompted us to spend in the past. Was it such a deeply entrenched set of spending values that was not only so unknowingly programmed into us, that we knew of no other choices? Was that programming the cause of our self entitlement mindset; where we wanted to buy what millions of others were buying, to fit in, to keep up with the Jones’s, or did we develop such an angry defensive attitude, so as to justify our overspending?
Think about this… could it be that America’s wealth was based on debt? American’s were spending money they did not have. They were borrowing money to cover expenses, going on vacations without the cash needed to pay for them. They went shopping until they dropped, using credit cards until they were maxed out, only to get a new one and start the same scenario over again, while paying the minimum payments on their credit card accounts.
When they bought cars, they bought just slightly (to rationalize) over what they could afford, accepting interest rates without a thought in the world. Likewise, they bought homes slightly over what could afford, all the while, thinking they would get raises to compensate for future tax and insurance increases. Of course, they said, “I deserve this, I want this”. Up until the time credit card companies programmed us, when we needed a replacement vehicle, we saved for it. When we needed a new stove or anything else, we saved for it. We lived within our means.
So… the first thing we need to do, in order to put our spending back on track, is to truthfully acknowledge reasons we spent in the past. Once we decide to face it head on (keep thinking that the old way may have made us feel important), we must accept, in reality, our overspending caused stress, interfered with sleep and maybe caused such debt that we’d live our lives out just repaying what we owe! It took a disaster to give us a wakeup call. We now see our past spending habits brought us nothing but grief.
Experts tell us we need a drastic change in our spending, that our economy will never be same, but they don’t tell us what to do to change. A reader of A Life Preserver in a Sea of Debt said it is the change we need.
But when people hear the word change, they immediately put up a defense barrier, thinking it is a negative approach and therefore have no desire to change. So instead of thinking negatively, think of change as having a positive romance with money. Have fun in a new revelation of spending choices. Make a game out of it. High five ourselves every time we save and every time we don’t spend where we did before. This is the positive attitude we need to break away from past spending habits, to release the magnet that had such a distinct hold on our spending.
Yes… It’s all in the mindset. This is where we start. Once we make it a habit, it becomes second nature. It follows us throughout our lives. We have permanently left overspending in the dust and have no desire to return to our old habits.
Next week: More ways to start, plus…
First, go over, in our minds, and then write down what had prompted us to spend in the past. Was it such a deeply entrenched set of spending values that was not only so unknowingly programmed into us, that we knew of no other choices? Was that programming the cause of our self entitlement mindset; where we wanted to buy what millions of others were buying, to fit in, to keep up with the Jones’s, or did we develop such an angry defensive attitude, so as to justify our overspending?
Think about this… could it be that America’s wealth was based on debt? American’s were spending money they did not have. They were borrowing money to cover expenses, going on vacations without the cash needed to pay for them. They went shopping until they dropped, using credit cards until they were maxed out, only to get a new one and start the same scenario over again, while paying the minimum payments on their credit card accounts.
When they bought cars, they bought just slightly (to rationalize) over what they could afford, accepting interest rates without a thought in the world. Likewise, they bought homes slightly over what could afford, all the while, thinking they would get raises to compensate for future tax and insurance increases. Of course, they said, “I deserve this, I want this”. Up until the time credit card companies programmed us, when we needed a replacement vehicle, we saved for it. When we needed a new stove or anything else, we saved for it. We lived within our means.
So… the first thing we need to do, in order to put our spending back on track, is to truthfully acknowledge reasons we spent in the past. Once we decide to face it head on (keep thinking that the old way may have made us feel important), we must accept, in reality, our overspending caused stress, interfered with sleep and maybe caused such debt that we’d live our lives out just repaying what we owe! It took a disaster to give us a wakeup call. We now see our past spending habits brought us nothing but grief.
Experts tell us we need a drastic change in our spending, that our economy will never be same, but they don’t tell us what to do to change. A reader of A Life Preserver in a Sea of Debt said it is the change we need.
But when people hear the word change, they immediately put up a defense barrier, thinking it is a negative approach and therefore have no desire to change. So instead of thinking negatively, think of change as having a positive romance with money. Have fun in a new revelation of spending choices. Make a game out of it. High five ourselves every time we save and every time we don’t spend where we did before. This is the positive attitude we need to break away from past spending habits, to release the magnet that had such a distinct hold on our spending.
Yes… It’s all in the mindset. This is where we start. Once we make it a habit, it becomes second nature. It follows us throughout our lives. We have permanently left overspending in the dust and have no desire to return to our old habits.
Next week: More ways to start, plus…
Friday, February 12, 2010
Wake Up Call
The economy is a mess. We are all affected by its repercussions. If only there was information available to help us cope, deal with, and emerge stronger than we were before…
There are all sorts of parents: some are frugal and others spend themselves into debt and others are somewhere in between. No matter where you fit into this scenario, your children follow your lead. They observe and follow your example. So, if you handle money indiscriminately, your children don’t have any other knowledge to handle their finances any differently.
So, let’s go back to parenting. Say, 50 years or so, ago, you witnessed big credit card companies in their infant years. Their advertisements made us believe that we could buy anything we wanted, whether we had the money or not. People followed their lead, paying the minimum on revolving charge accounts. We followed the masses as we were all programmed to overspend and we were not aware this was happening.
Now, we are aware of the end result of this kind of behavior. Funny thing is… in the past, we may have heard of warnings of this upcoming crisis, but we have again been programmed to think “Oh, no. I’m fine the way things are. That’s all hype. I’m not going to change my spending habits. If I want something, no one is going to tell me not to buy it!”
Yes. Our spending habits are deeply entrenched. It’s what has defined us in the past. So, now… currently… we find us, not only in credit card debt, but without a job. And we might loose our home because we cannot afford the mortgage anymore.
Reality creeps in… a gnawing voice relentlessly nudges us… ”If” we had been more prudent with our money in the good times, perhaps we would have been able to survive the economic crisis with minimum losses.
So… now… we realize we won’t wait until a disaster strikes before we get a wakeup call. We now look for ways to improve our lot. But where to start…
Next week: Where to start
Judy Guralchuk, author of A Life Preserver in a Sea of Debt: How to acquire a new mindset to transition from overspending to permanent financial stability.
There are all sorts of parents: some are frugal and others spend themselves into debt and others are somewhere in between. No matter where you fit into this scenario, your children follow your lead. They observe and follow your example. So, if you handle money indiscriminately, your children don’t have any other knowledge to handle their finances any differently.
So, let’s go back to parenting. Say, 50 years or so, ago, you witnessed big credit card companies in their infant years. Their advertisements made us believe that we could buy anything we wanted, whether we had the money or not. People followed their lead, paying the minimum on revolving charge accounts. We followed the masses as we were all programmed to overspend and we were not aware this was happening.
Now, we are aware of the end result of this kind of behavior. Funny thing is… in the past, we may have heard of warnings of this upcoming crisis, but we have again been programmed to think “Oh, no. I’m fine the way things are. That’s all hype. I’m not going to change my spending habits. If I want something, no one is going to tell me not to buy it!”
Yes. Our spending habits are deeply entrenched. It’s what has defined us in the past. So, now… currently… we find us, not only in credit card debt, but without a job. And we might loose our home because we cannot afford the mortgage anymore.
Reality creeps in… a gnawing voice relentlessly nudges us… ”If” we had been more prudent with our money in the good times, perhaps we would have been able to survive the economic crisis with minimum losses.
So… now… we realize we won’t wait until a disaster strikes before we get a wakeup call. We now look for ways to improve our lot. But where to start…
Next week: Where to start
Judy Guralchuk, author of A Life Preserver in a Sea of Debt: How to acquire a new mindset to transition from overspending to permanent financial stability.
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