How to save money and pay off any and all debts
We are encouraged from early on to start amassing debt. You watch any ad on TV, you watch anything with our parents, and we see ourselves being able to use some form of payment other than cash. Go to the grocery store – get out your credit card. Go to the gas station – take out your credit card. Pay bills online using credit cards. All of these things are ways of encouraging us to amass debt.
Sometimes it’s best to save money and not use your credit cards. Sometimes if you’re disciplined, you can use your credit card, but on a monthly basis pay it off, so there’s zero balance being carried over each month. People do this for several reasons. One, it’s easy. You can keep track of your assets and expenses on a monthly basis. Two, there are side benefits such as points towards rooms, such as a Marriott credit card or points that could be used for travel. Some people use it for cash back.
It seemed that the world is filled with two types of people; those who are able to have discipline, and that they have a credit card paid off every month and the rest of us who don’t have that discipline and do carry a balance. They carry a balance every month. It keeps on building and building.
Where do you fall? Even if you’re successful and you saved a lot in your retirement plan, such as several hundred thousand more inside of your 401(k) plan, you probably and might still have credit card debt. I recently wrote an article about ways on learning how to pay off credit card debt and I talked about the first secret of debt to paying off. I talked about the importance of spending money towards both paying down the credit card debt and equally towards increasing your personal emergency saving fund. I’ve included a diagram that shows the explanation of the some of the text of that secret below.
I have tried this before, on myself and with others, and it does work. However, it does not answer the bigger question.
The bigger question is why do we have, and why do we feel comfortable amassing so much debt, and why is it nearly impossible for us to pay it off without some form of changing a pattern. Obviously changing the pattern is doing exactly what the ‘so called’ experts say not to do, which is save money and pay off debt, as opposed to just paying off the debt.
Why does this work, and trust me it does work.
The answer to why this works is deeper and started when we were at a young age encouraged to amass debt. There is a deeper darker secret going on in the U.S. economy. The U.S. economy is brought up by spenders. The more we spend, the better our gross domestic product and by our consumption rate of goods and services the higher the stock market goes. It’s a never-ending cycle. You’ll see an increase in the stock market whenever consumers are saving less (and spending more).
We are encouraged by these companies to spend money. Now unfortunately, most people don’t have a large surplus of money to spend. In fact, most will retire with less than $25,000 to their name, so where can people find money? The answer is, they can borrow it. They can start the never-ending cycle of building up debt which they will have to service, thus tapping themselves into borrowing more money to spend more money.
The system continues to encourage this spending at all levels, including most corporate levels. The current reward system for corporate America is ‘ how are we doing each quarter’, not how are we doing two to five years from now. The CEO of a publicly traded company is usually directly rewarded by how much they have either saved the company or made in additional income, in a three month period. There is no deeper incentive for a CEO to focus on anything more than the immediate — this creates an economy of what have you done for me lately. The CEOs of these large publically traded companies are encouraged to increase share price. The way to increase share price, is how much income do they make now, as opposed to how much are they making in three to five years.
If you ran your own business, and your only goal was to increase revenue and income right now, today, not worrying about what happens two years from now, you would often find yourself in two years, out of business. You didn’t reserve money. You didn’t save money. You didn’t plan for the future. You didn’t put money into RMD. You didn’t do what a prudent business owner would do. However, you spent enough money currently to generate income right now. You sacrificed the future for today. If you as a small business owner ran your business like that, in two years or so, you would be gone. However, if you ran your business like that as a corporate American company, you wouldn’t be gone. You would be rewarded.
Corporate America is designed for short-term greed and there is a system that has been placed here that is encouraging people to spend more on consumer goods to increase short term needs of the companies. This system is called the debt system. You’re encouraged from an early age, such as going to college, all the way up to when you graduate to amass and incur credit card debt, and when we retire with less than $25,000, we are still in that cycle of carrying that debt.
How to break the cycle: The best way to break the cycle is to stop playing the game. Do not agree to take on more debt. Do not agree to help short term players out there, and only look for companies that have a belief system of long term gain. Such companies usually are the ones that have longer histories of dividends. Some of those companies are for example: Kraft, AT&T, Southern Energy, and other high dividend paying companies. The truth is these value companies are in fact savers. These long term value companies are being ‘rediscovered’ this year of uncertainty. They will continue to rise this year. Don’t play their games anymore.
Plan today, protect tomorrow.
Peter Blatt
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