I have written about becoming debt free, and staying debt free often. Each time I try to add something that might be more helpful than before. So when I see a different path that worked well for an individual, I share it excitedly. My prayer is that this current approach to becoming debt free, though simple and probably familiar, will work for you as you start 2017.

Conventional wisdom about becoming debt free says, cut up credit cards, work with a budget, consolidate loans, pay yourself first, and create an emergency fund, among other things. To be sure, that’s solid, realistic advice. However, each situation is unique and sometimes these and other great solutions frustrate folks as they start their debt removal journey. And starting properly is crucial to staying the course.

Process of Becoming Debt Free is Personal

It’s essential to adapt the process to becoming debt free to each individual’s circumstances. To do this well, I suggest that folks embrace these three initial steps.

• First, understand and accept your condition exactly as it is.
• Second, realize that your attitude, and behaviour (your lifestyle) must be the focus, not financial reorganization.
• Third, accept that generic solutions might not work for you.

Believing these three themes will provide a realistic base to make sound, reliable decisions. Let’s examine each.

Becoming Debt Free Starts with Understanding and Accepting your Unique Condition

Surely, understanding and accepting your condition should be obvious and simple to do, but in practice it tends to be a major stumbling block. Why? Normally, folks wait until they exhaust all options before they seek help to stop their debt buildup. Then again, pride, fear of rejection, depression, and many other issues cause people to keep this secret.

One person I counselled, let’s call him Jack, as his debts climbed he got more credit cards to pay the minimum on earlier cards until banks refused to give him another card. By then, he used his line of credit and had almost $40,000 total debt. Reluctantly, he spoke with me, first about hypothetical scenarios, and after a couple meetings he told me his real story. I was shocked at how easy he got credit with his bad habits and bad credit.

When Jack came to me he was in the blame mode. Everybody but he was the problem. Payments on the no-money-down deal on his furniture were about to start, and he was furious with the interest he had to pay now that he could not repay the full balance. It took several weeks for Jack to accept that he made bad choices, aided by the financial system, and he was merely facing effects of these prior decisions.

Once Jack embraced his condition, and realized he was not a victim, he shifted to the proper frame of mind and turned to solutions. Sadly, this was a long journey. Meanwhile, interest charges mounted.

Your Lifestyle must be the Focus to Becoming Debt Free

The second big challenge was to get Jack to agree that his lifestyle needed to change before he looked at financial solutions. This is tough to accept. The media presents debt consolidation, refinancing, and other techniques as simple solutions, and Jack bought their lies.

Thankfully, after many sessions he understood he must be patient, realistic, and before seeking a solution, he must learn what caused his debts. That’s the key, not why, but what did he buy and how did he decide to buy. Each of us can rationalize why we did what we did, so it’s not beneficial to go there.

Jack looked at his last two years’ buys by examining credit card statements, and walking around his house. He listed major purchases and recalled specific triggers that made him spend. Here are a few examples:

• Replaced the fridge – His existing fridge was four years old, in reasonable condition, but there was a great deal, 50% off, that he took using his credit card.
• Upgraded his iPhone – Yearly he upgraded and bought-out his contracts on credit.
• Replaced furniture – There was a no money down for two years deal that he took. Now, two years later, he needed to start monthly payments.
• He ate out three times weekly using his credit card.

His research showed he spent frequently on many small items, and bought only a couple high priced items. However, he did not keep track of spending and commitments, did not review monthly statements, and so he did not realize the gradual debt increase. Jack believed that provided he could pay the minimum on his cards, he would be fine. Now, he knows where he needs to change, and is determined to fix the problems.

Generic Solutions to Becoming Debt Free Doesn’t Work

Once he understood his situation, we designed a specific, non generic, path for him. He agreed to do the following:

1. Record all spending in an app, computer file, or notebook (he chose a notebook) showing the date, item bought, and the decision-process followed before buying.
2. After six months recording and learning spending habits, prepare a budget–not before–and stick with it. The budget would include debt repayment, and small amounts for entertainment and emergencies.
3. Focus on the little items:
   1. Get rid of cable 
   2. Cancel telephone land line
   3. Eliminate internet and use the library’s internet
   4. Stop using extra data on his iPhone
   5. Eliminate junk from his groceries, don’t buy box items, buy no-name brands
   6. Upgrade nothing until he was out of debt
   7. Buy no books or clothes for the next two years
   8. Track debt balance consistently: Write debt balance on a three-by-five card and put on the fridge. Monthly, cross out the old and write the lower, new balance. This procedure should be motivating
   9. Follow a two-stage process before all spending: First, establish the need. Second, decide if he could pay cash. If he could not pay cash, he could not afford to spend. And so he would not spend. That’s it! 
   10. There are always sales and deals, don’t let them decide spending. When he needed something, wait for it to go on sale and pay cash or use debit. Don’t spend impulsively.
   11. Don’t spend coins received as change. Place them in a special debt repayment piggy bank and apply against debt every six months.
   12. Look through personal belongings and sell unneeded items to pay down debt.

It’s Easy To Stop Using Credit When You Have None

It was easy to stop using his credit cards. He had no choice because he had maxed them out. They were worthless, so Jack cut them up. Still, we agreed Jack would not use credit cards again, especially those cash back and travel points cards that were merely hooks to get him to spend. I told him about research that showed he would spend more using plastic.

What Different In This Path to Becoming Debt Free

What’s different in this approach? Three aspects: First, the emphasis on recording spending and learning spending drivers and triggers before budgeting. This meant less frustration once Jack started to budget. Then, he would understand clearly behaviours he needed to control. Second, the six month learning period help him to see the importance of tracking spending regularly, particularly his many frequent, small buys. As well, he learned to review and reconcile his bank statement regularly. Third, the two step spending decision process allowed him to focus on affordability before spending.

One year into this program, Jack was pleased with the significant (30%) debt reduction. His main concern during this time was resisting deals when he visited malls. However, he found the perfect solution: He stopped going! Meanwhile, an unexpected and pleasant surprise was the benefits of not having the internet at home. This was a huge blessing as it freed significant time, and removed the temptation for online buys. Today, he reads regularly, and does other personal stuff he put off over the years.

© 2017 Michel A. Bell

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