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Opinion: You work hard to pay off debt. Here’s the surprising secret that keeps you from falling behind when the economy slows down


Credit card debt has increased by 13% in the past year – the biggest increase in 20 years. If you find yourself saddled with a growing debt, you need to get yourself back on track before it gets out of hand.

As I’ve learned from coaching thousands of people on how to clear credit card debt and stay debt-free, the answer isn’t just to cut the credit card.

The combination of these mindset and behavior changes along with some important financial steps will help you get there.

Change the way you talk about money

To really know your “money itself,” pay attention to what you say and hear about it at work, at home, when out with friends. Often tends to focus on the negative. Changing your language if you want to change your perspective on money is the first step to improving the place of money in our lives.

Start using money-positive language today. Start saying “I choose not to buy” this item or “It’s not a financial priority.” This shows that you are making conscious choices.

On the other hand, saying “I can’t afford it” takes you away from responsibility. You become a victim of something beyond your control, implying that you have nothing to do with it.

For example, if you decide to buy a more expensive home with a larger mortgage and maintenance costs, you may not have as much to spend on vacations, shopping for clothes, or a big-screen TV. That doesn’t mean you can’t afford a big-screen TV – it simply means you’ve spent your money elsewhere. Your decisions reflect what is important to you.

Mindset is powerful, and the language you use can support that change. Use positive words to support that change. Telling yourself “I save a little every month” will change your mind as you accumulate savings no matter how little your savings account is growing.

It is important to strive to use language that demonstrates ownership and responsibility for money. Positive language changes our attitudes about money when heard often enough.

Negative reinforcement of your financial situation, even if it is self-talk, affects self-esteem. Stop beating yourself up with negative words like “I will never get out of debt” and “I am a financial failure”. this is a psychological cost of debtand studies have found a link with depression and suicide.

You are not a victim of your financial situation.

Slowly modify your behavior

Don’t even consider any debt consolidation plans or home loans until you stop creating new credit card debt.

While that debt can go away, people often get right back to their previous balance, even if it’s five figures, within six months if they pay off their credit card debt in one go. time. That’s because there is no accompanying change in behavior. Instead, invest your time in behavior change.

Like food-related changes, slow and steady wins the race to form new money-making habits. Start by looking at what’s on your credit card bill each month. People often see recurring charges for services they don’t even use anymore or worse, something they never signed up for! Take the time to get them off your credit card.

Are there other automatic payments for services you use that you can forgo until your debt is paid off? Every $10 you cut also lowers the interest fee and gets you to the point of paying off sooner.

Choose to live without charging anything for a month while you create a sustainable plan for your financial life.

Interrupted credit cards will help you build a new habit of thinking before swiping, clicking, or tapping. Continue to use that new language for financial decisions to make it easier.

When you cut your spending, be honest with your friends. Meet for a drink in place of dinner or coffee for a drink. If what you value is time spent with friends, they will understand and may even be happier with creative, alternative plans.

Plan now for the holidays. Talk to the family with the request to “simplify the holiday”. Proposing that each person give only one gift to one person instead of giving gifts to all or everyone contributing to the meal. If you take the lead, you may be surprised at how relieved and grateful others feel.

Make a spending plan

Once you start changing your language and limiting your credit card usage, it’s time to face your numbers and create some new life habits.

Financially:

  • Always pay the minimum on your credit card debt. Otherwise, you will have to pay more in fines and fees.

  • Until you create a spending plan that allows you to live within your means and see the bigger picture, pay only the bare minimum. (Yes, you read that right.) Sitting with the discomfort of knowing your total debt will help reinforce why you need to change your behavior and language. Debt takes a while to kick in. It will take a while to get it back to 0. Remember, a quick fix is ​​not a permanent fix.

  • Make a plan that allows you to cover expenses with your income. It’s your net income – not your salary – that matters. Write down all the expenses you incur for the whole year, not just the monthly ones. The physical act of doing this instead of just reading the past year’s spending summary makes you more conscious of your spending. Your brain processes information better. Visually the difference will help you understand why there is a budding debt problem.

  • Be sure to allow a dish that you consider a dinner – go out to dinner once a week, a movie a month, or something else you love. If you make money for fun, you’re more likely to stick to your spending plan and continue to use positive language.

For a powerful reminder of how combining a new language, new behavior, and new approach to spending can improve your finances, I offer one of my favorite examples, a A client has told me that she “will never get out of debt. I tried. ”

I asked her to try one more time. I challenge her to do two simple tasks each week: first, create a way to save money, and second, have fun with just $10 a week.

At the end of six weeks, she showed up in my office looking full of energy and smiling. “I tried so many new things! Save money by going to the library rather than buying a new book. Then I treated a friend to coffee, it was fun.” She continued her list of new behaviors that fit her cash-flow plan, from one afternoon meal to canceling two movie subscriptions.

I asked about paying her debt. She laughs, “I am paying the bare minimum and living on my income completely. I saved $150! “

She eventually paid off her debts for the year and then got out of debt.

Research shows it can take as little as 18 days to form a habit, but for some people it takes weeks. The key is not to give up if you fail once. Just getting you back on track without negative language or using old behaviors.

Consider other resources: Debtor Anonymous, books, podcasts, and therapy that can be covered by insurance, will remind you that you are not alone and there is a way out. My favorite book is “How To Get Out Of Debt, Get Out Of Debt And Live Prosperous Forever” by Jerrold Mundis; The most recent edition was published in 2012.

Do you feel that this slower approach will never get you out of debt? Consider this: If money problems could fix money problems, lottery winners would never go bankrupt. However, many of them do. More important, when interviewed five years laterMany people wish they had never won.

Debt is not just a numbers game. Start changing your behavior, language and cash flow planning now. The lasting effects will be felt for years to come.

CD Moriarty is a certified financial planner, a columnist for MarketWatch, and a speaker on personal finance. She blogs at MoneyPeace.

Learn how to change your financial habits at MarketWatch’s The best new idea in the money festival on September 21 and September 22 in New York. Join Carrie Schwab, president of the Charles Schwab Foundation.

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