How many of you have said “I’m always going to have a car (or credit card, or student loan) payment”? Ten years ago, I was definitely one of those people, and I know a number in my family still think that way, and I’m sure some friends and other associates do as well. Even if it’s not in the forefront of your mind, you may not be able to imagine your life without a payment, even including a mortgage payment.
Basically, for most of us, we CAN live a life without payments, even if we’re earning barely more than minimum wage. You may not like what you hear, and it probably won’t work in all situations. For example, I can imagine a single parent with multiple kids barely making it by paycheck to paycheck or on government assistance aren’t really able to do much with their finances, but this article isn’t necessarily to cover those situations yet. But for others, we can look back upon what years of financial and frugality blogs have been telling you.
The main tenets for living a life WITHOUT payments
I’m sorry about how simple these sound, but you’ll also recognize how difficult they are to implement into your lives and finances:
- Cut out your discretionary expenses.These are WANTS not NEEDS. You WANT cable TV. Most of us just WANT a smartphone plan (you only NEED it if you’re self-employed or in 24/7 support). You WANT air-conditioning, but unless you’re old, sick or living in the deep south, opening a window will work just fine.Think about how much you spend on some of these expenses. Cut down your cable plan to the minimum and maybe save $100 per month. Drop back (if possible) to a regular phone plan and save $30 or so a month. Cut out your A/C or reduce your heat demand (and use blankets and more clothing) and save a few hundred a year. Imagine how much $1200 per year for cable, or $360 for a data plan, or however much for heating/cooling would make a dent in your payments.Remember, there are NEEDS (sometimes internet does fall into that, especially or someone like me who works from home) and WANTS (I don’t need cable except to get a cheaper rate on my internet…and to keep the wife happy!). But even bigger in the wants/needs conversation is this next one…
- Stop spending so dang much! I’ve chronicled how I’ve spent wayyyyy too much on cars, especially starting with my first one. If you need a car, buy what you NEED and deal with it. Buy something used so you don’t get smacked with the instant depreciation. Know your financing options and your credit rating so you don’t get swindled by the dealer’s finance department. Don’t only think of things in terms of payments, but rather the whole cost. You don’t NEED leather. You don’t NEED navigation. Heck, you don’t even NEED an automatic transmission. You do NEED safety items like ABS, traction control and a certain number of airbags. If the car has a few dings and dents, it’s still what’s underneath that counts and how dependable it will be for you, so don’t look for a shiny new (or even used) BMW because you’ll just be getting yourself stuck further in a hole. Did you know that there are more auto loans over 5 year terms now than under 3 year terms? It’s a combination of wanting too much, focusing on payments rather than total cost and overall poor decisions.Some of you have other spending problems like pricey groceries, clothing, gadgets, bottled water (cause, oh my GAWD the city’s water isn’t good enough for me!), but if you want to get out of debt and payments, CUT BACK YOUR SPENDING!!!
- Sell Sell Sell!!! Want to get out of debt? Sell the crap you have, including your overpriced or over-optioned car. If you’re in the hole on a loan, figure it out (I think I did an article on your options a while back, but talk to your bank to find out your options anyway). If you’re REALLY in over your head with, say, your mortgage, then it’s time to look at selling, even if that involves short-selling or foreclosure. BUT, don’t take those last 2 options lightly because it will haunt you for many years to come. Those are drastic measures for drastic situations only. Ultimately, if you can sell off everything you own except a pot and pan to cook with, a mattress to sleep on (or sleeping bag), etc. and use that money to get out of debt and start over, it’s a crazy, crazy idea, but I challenge you to look around and see how much stuff you could throw on Craigslist, eBay, consignment, etc. and never miss.
- Stop racking up more debt! Again, it’s tough if you’re barely hanging on paycheck to paycheck, or especially when you don’t have any income and you feel you have to use credit to get by, but when you take care of #1, 2 and 3 above, you should also work on not accruing more debt and continuing the cycle. Heck, did hear about the woman who had to postpone becoming a nun for almost 10 years because she had to get out of debt first? Even those of us who feel a higher calling are pulled down by the realities of debt!
So the lessons are stop spending needlessly, get rid of the stuff you have (for a price) to pay down your debt, stop racking up more debt and just try to get back to a fresh start with your financial life if you can.
This plan doesn’t work for everyone. Got 3 kids? Gonna be hard to explain to them you have to sell all their toys, right? But you CAN cram them all into a sedan rather than a big 3-row SUV or minivan. Before vans and SUVs (aka, in the 20th century), EVERYONE did it! Granted, child seats were smaller (or not required), while today they’re these massive roll-cage devices that can withstand a nuclear explosion.
But strapping junior to the roof is still an option, right?