Affluenza – the credit party is over

Jul 182008

So now that the easy credit party is over and we are all feeling the effects of the debt hangover the question I have is ‘was it worth it?’. Were the few short years of fast living and easy money worth the pain we are feeling now?

I’m as guilty as the next person of over indulgence – if I wasn’t I wouldn’t be writing this article about trying to understand and make sense of debt.

I have often wondered what led to the furious spending and house buying that we have witnessed in the last few years. I think that while easy credit played a huge part in the madness there must have been something else at play. I always got the feeling that there was almost a collective agreement in society that it was good to spend your way to oblivion. Tacit approval to use your credit card was everywhere. Everyone else was doing. It was the case that ‘we are all in this together’ so don’t feel bad.

Then about a year ago I came across the concept of ‘Affluenza’. I thought that it was just the latest buzz word and would soon be consigned to the annals of history but then I dug a little deeper. The concept of affluenza was a perfect fit for that collective urge to spend that I had felt a part of.

Taken from Wikipedia.

affluenza n. 1. The bloated, sluggish and unfulfilled feeling that results from efforts to keep up with the Joneses. 2. An epidemic of stress, overwork, waste and indebtedness caused by the pursuit of the American Dream. 3. An unsustainable addiction to economic growth.

I couldn’t agree more with the definition above.

In reality we were taking part in a competition that we could never win. There was always going to be someone with a faster car or bigger house than us. It was a giant ponzi scheme and we are the suckers who will have to pay the price.

I’m not bitter and I don’t think you should be either. Ultimately it was through my own decisions that I ended up in debt. Had I don’t things differently I wouldn’t have this debt problem. Being bitter about your situation serves no purpose. Sure you want someone to blame and lash out at but in the end the answer is always the same. It was you who signed up for the good stuff and now you must take the bad stuff that comes with it.

Take the rage and anger you have at your situation and use it as the driving force to get you out of debt and cure you of affluenza. Channel that negative energy and get some positive out of it. Show the banks and financial institutions that while you may have been a little naïve in your spending that they won’t be able to count on your contribution to their bottom line.

The theory and research into affluenza are fascinating. If you want to learn more about what affluenza is and why and how it has such an impact then I recommend you read this book. Get it from the library or buy it second hand on amazon.

Affluenza: The All-Consuming Epidemic (Bk Currents)

As a cure for affluenza I can’t recommend the following book highly enough. This book takes a very different approach to personal finance. You will like it – its far from your average dry and boring personal finance book.

Your Money or Your Life: Transforming Your Relationship with Money and Achieving Financial Independence

Fast ways to eliminate credit card debt

May 082008

So it has suddenly dawn on you that you have a lot of credit card debt and you are looking for a fast way to eliminate it? Well the good news is that you can eliminate your credit card debt a lot quicker than you think but the bad news is that it involves a lot of hard work.

I have put together a list of ways that should help you eliminate your credit card debt fast. The thing you need to be aware of is that in order for this to happen for you, you will need to be committed. The great thing is that because these ideas will help you pay off your credit card debt fast then you won’t have to be committed for long.

The list is made up of simple yet highly effective ideas to help you. How you work it is entirely up to you. You can choose one idea and focus on it or you can use a combination of ideas. The key thing is that whatever one you choose you must take action on it and see it through. There is no point paying lip service to this. YOU need to take action otherwise you are wasting your time.

Remember the focus here is on speedy debt elimination. How fast you eliminate your credit card debt is a direct result of how much action you take. At the same time you do not want to take on any excessive tasks that make you end up feeling miserable. Focus on having fun and the end result.

1. Buy time for yourself by transferring your credit card balances to cards with lower introductory rates. There are a multitude of balance transfer deals out there. Find one that suits you. Do your homework and make sure to check the terms and conditions for any penalties. This will involve some paper work but it will help slow the rate at which your credit card debt is increasing while at the same time allowing you to concentrate on eliminating that debt.

2. Extreme budgeting for one month (or as long as you can stand it). This is taking budgeting to the next level. What this involves is for you to stop buying absolutely everything apart from the bare necessities – food and transport. So this means no lattes in the mornings, no lottery tickets, no cable TV, no new clothes, no dinners out, no movies, bring your lunch to work, shop at discount food stores etc. I think you get the idea. At the end of the month you need to calculate how much you saved and then transfer this amount off your credit card. Now I’m not advocating this lifestyle long term but you would be surprised at the progress that you would make in a month or two of it. You could simply become a monk for a month? I did say it was extreme.

3. Downsize your car. If it is possible for you to get a smaller and more economical car then do it. Any money that you save on lease payments and fuel can be put towards eliminating your debt. I did say fast not easy.

4. If you have a mortgage look around for a better mortgage deal. In some cases you can significantly reduce your monthly repayment. It depends on each case. Again do you homework and check the small print. The amount of deals on offer is probably smaller since the credit crunch started.

5. Get a second job. Okay if you are considering this then you need to think about logistics and how you will manage your time. If you resolved to put all of the income from your second job towards your credit card debt then it won’t be long before you eliminate it.

6. Do you have any existing savings? If you do then it probably makes sense to use these savings to help pay off your credit card debt. The reasoning is simple. If you are paying a rate of 16% on your credit card debt and only receiving 3% (if you are lucky) on your savings then it makes financial sense to pay off your debt because your are incurring interest on your debt at a much faster rate than you are incurring interest on your savings.

Imagine the scenario where you have transferred your credit card balances to a lower introductory rate, downsized your car, took on a second job all the while following an extreme budget. How long do you think it would be before you had your credit card debt paid off? What could you do with an additional $500 per month? $1000 per month?

When you look at it from the point of view of the additional income you can make/save then it becomes obvious that it is path worth following. Now as I said before you don’t have to use all of the ideas on the list, even if you implement just one of these ideas correctly then you will be well on your way to eliminating your credit card debt.

It requires discipline and dedication to eliminate your credit card debt. It’s not easy but with the right amount of focus it can be done.

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