I have listened intently for several months to Dave Ramsey and I believe his methods are based in sound fiscal ideas and analysis of human behavior. I wanted to expound upon his “Debt is Dumb” phrase and express some ideas that many folks may not understand.
In these uncertain economic times, we often ask ourselves just what we would do if we were one of the thousands who have lost their job due to the economic downturn. Well, the fact is that many of us would do nothing and some would find something else to do in the meantime.
It isn’t really rocket science and there is no magic solution. The facts are pretty simple. If you owe a creditor and you cannot pay them, you will lose your posessions if they are security for the debt. The simplest solution is often the most profound once we take time to examine it closely. What you should be asking yourself isn’t “Who is going to help me?” but rather, “How am I going to deal with this problem?” the answer you come up with may mean the difference in losing everything or just some things.
If you cannot meet your obligations, you need to consider several alternatives. The first of which is to remove yourself from the ability to utilize credit. Credit is your enemy and is the reason you are in the situation you are in right now. To quote Dave Ramsey, “debt is dumb”. If you don’t have the cash, then you don’t buy … period! Next you look at your assets and decide which of them you can sell quickly and on your terms … it must be on your terms because if it is on the banks terms, you lose every time. At least if you sell it yourself you may gain something from the sale, you certainly will not from a bank sale. The third step is to get another job to pay debts that you are short of paying. Even if the job is minimum wage, the money earned to pay your mortgage is a whole lot less than the equity you may lose if you don’t pay your mortgage. Remember the banks are not your friend.
Now that you have a minimum wage job and still can’t survive, you must look at the various “things” you posess and begin to cut away. Immediate things that come to mind are, going out to restaurants, cable television, internet access, cellular or household telephone and gasp … vacations. Cut cut cut .. when you don’t think there is anything else to cut, check again. I promise you that it is there. You just haven’t reached that level of dispair … yet. If things don’t change immediately for you, you can bet you will reach despair. The decisions become much easier at that stage. It seems that so long as we are beholden to our “things” we have a difficult time making rational decisions that could well mean the difference between being poor and being homeless and poor.
Don’t wait too long to change your habits. The sooner you start, the better off you will be.