I have been debt-free for fourteen months. I prefer to live a life free from credit cards, borrowing money, or paying interest. If you are thinking about getting out debt, congratulations!

Escaping The Credit Card Web

Step 1: Stop using a credit card. I do not use credit cards, period.

Step 2: Pay you credit card minimums, every month, on time.

Step 3: Pay extra towards one specific credit card, either the credit card with the lowest balance or the highest interest rate.

Step 4: Call all credit card companies and ask for reduced interest rates.

Step 5: Consolidate (move debt from one card to another) IF you can get a better rate and you FULLY understand the terms of the balance transfer.

Step 6: Do not get frustrated if Step 4 does not work.

Step 7: Take a few minutes and plug your credit card information into this handy debt repayment calculator. Now that you are moving forward, you can adjust your goal dates and extra payments.

Step 8: Read this book for motivation and advice. Dave Ramsey’s: The Total Money Makeover: A Proven Plan for Financial Fitness (affiliate).

Step 9: Now that you have your basic plan and are moving forward, read this post, detailing (almost) everything I know about debt repayment.

Step 10: Find (or create) a support “network” or “group”. I believe in accountability. I have even created an online network where members can publicly share their progress! (No Credit Needed Network) You need to have (at least) ONE person who can support you, cheer for you, and encourage you. (I believe so strongly in this concept, I started a blog, just to share my journey with the whole world!)

If you enjoyed this article, you may be interested in the latest episode of my podcast, the No Credit Needed Podcast.

Additional resources that helped me to get out of debt include:

YNAB Personal Budget (affiliate)
Dave Ramsey’s Radio Program
Financial Calculators
Personal Finance Blogs

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Okay, the hottest thing going today, in the financial realm, is the “Cash Back” credit card. Almost every major credit card issuer is offering one of these “wonderful” things, promising you cash back for the purchases you make. Some promise cash back for groceries, gas, or everyday purchases. You can get bonus miles, bonus cash, and bonus gift cards. Wow! These things are wonderful…

Hmmmmmmm…

Get real. These things are CRAP. Why? Because, when you use credit cards, you are using a form of payment which is not “real”. Whenever you spend real cash, you “feel” the transaction. When you use credit, you don’t “feel” the money leave your pocket. Be honest… Which is easier? Handing someone THREE ONE HUNDRED DOLLAR BILLS for a new digital camera, or swiping a credit card and creating a debt of THREE HUNDRED DOLLARS? You know the answer. It is MUCH, MUCH, MUCH “easier” to use credit. Why? Because there is no emotional connection to the transaction. Credit card companies are not stupid. They know that the deals that they are offering you SOUND GOOD, but in the end, they are out to MAKE MONEY. My advice. PAY CASH. Feel the money leave your pocket. Watch it go into the money drawer. (Even using a debit card, which I do for various purchases, is easier than using cash.)

Now, there are several arguments against my position. I will list a few here, so that you don’t have to:
But ncnblog, I’m responsible with my credit and I pay off my balance each month.
But ncnblog, I was going to buy these things anyway, so I might as well get some cash back.
But ncnblog, I know how to handle my money, and I always make all my payments on time, and I am never going to be late or miss a payment. Relax.
But ncnblog, Credit cards are “safe” and they provide protection for me when I buy a product.
But ncnblog, Etc. Etc. Etc.

I hear what you are saying, and my response is…

Get real. Credit cards, for most people, are extremely addictive. They create a false since of security and a false prosperity. Here are my retorts:
I am glad you pay off your balances, but people spend MORE with credit cards than they do with cash. (Be HONEST, and think about how YOU are with your credit card!)
I am glad you were going to buy these things anyway… But, are you being totally real with yourself? On occasion, don’t you purchase items with the thought in the back of your mind… “Well, I don’t really need this, but I will get some cash back, and I might use it…”? Ladies, go check your closet for that purse or pair of shoes you charged, and think of how you justified the purchase… Guys, go out to your shop and look at that tool or gadget that you just had to have. If you did not have a credit card, would you have purchased those items…? BE HONEST.
I am glad you know how to handle your money… But, what if a payment gets lost in the mail, or the bank messes up, or one of these mega-banking corporations just arbitrarily decides to up your rate, or change your card policies? Oh yeah, that will NEVER happen, because these guys are known for their honesty and integrity.
Last, the “protection” part of using a credit card. Have you ever tried to dispute a charge on a card, or use their warranty protection services? If the answer is YES, then how did they do? I hope they treated you well, answered your service calls, and stood by you. In the answer is NO, then you have been relying on something for years and years, and never have had opportunity to use it. The “protection” afforded by credit cards is like the “protection” provided by a pet rattle snake. I would MUCH rather do business with honest people, with cash, and have my disputes and troubles handled face to face. (Why would you do business with someone that you would need protection from, especially protection provided by Visa or MasterCard?)

I know this post flies in the face of most pf bloggers, and that is cool. Most people talk of good debt and bad debt… blah, blah, blah. The borrower is slave to the lender…Whether the slave master beats you, or treats you like a member of the family, he’s still your master. And even the most benevolent master can turn around and break your neck.

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The single most over-rated “benefit” of credit is that it allows you to have what you want, right when you want it. We live in an “instant” society. We have instant oatmeal, instant pudding, microwave popcorn, always-on internet, universal cellular coverage. We demand, as a society and as individuals, that our wants be met on time, or even better, early. There is a tragic downside to this mentality. Stop, for just one minute, and try to remember the last 5 meals you ate, the last 5 conversations you had, the last 5 emails you answered, the last 5 people you hugged. SEE. We have so much going on, and we demand that so many of the things in our lives be NOW NOW NOW, that we rush through our lives. Knowing that we have this desire for instant gratification, credit companies make borrowing extremely easy. Walk into a store, see what you want, swipe a card, sign your name, and out you go. Bing-Bang-Boom. But, there is a sinister downside to the “convenience.” People are credit-spending themselves into deeper, and deeper financial holes. It’s so EASY to use a credit card. It is painless. I liken using credit cards to eating cotton candy. The next time you are at a state fair, buy a big bundle of cotton candy, and eat it as fast as you can. Trust me, an adult can eat an entire bag of the stuff in less that 15 minutes. Why? Because it FEELS light and airy, easy to swallow. Then, go ride a few rides, wait awhile, walk around a bit. That sinking feeling in the pit of your stomach? That my friends is the cotton candy doing its work. That sicky, sweet, nauseous feeling. It comes from eating too much, too fast, because it was too easy to consume. The same is true with credit. It will make you sick if you do not realize, QUICKLY, that it is extremely easy to over-endulge in its “sweetness.” So, the next time you want to use your credit card…STOP…Put your card back in your pocket, go home, read a book, watch some t.v., wait 24 hours, take a cold shower, take a walk…Now, do you really NEED what you were about to purchase, or did you just WANT it? Huh, huh, huh….well, if you NEED it, go out and earn the money for it. Stop the insanity of feeding your credit card obsessed financial sweet-tooth. Comments welcome…ncnblog

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One of my favorite shows on the tube is Myth Busters on the Discovery channel. These two guys test out urban legends. You should check it out sometime. Now that I have plugged their show, I am going to completely steal their gimmick, and bust some myths here. Below are 4 personal finance myths that need busting.

1. You should buy in bulk to save big bucks. Giant savings clubs like Sam’s and Costco appear to be great places for great deals, but be careful. If you buy more of an item than you can use in a timely manner, you may waste more money than you save. Remember, food and medicines can and often do go out of date long before you can use them. Meats can get freezer burn, fruits and veggies go brown, and even bulk meds can expire. Be sure that you will consume what you are buying. That huge vat of mayo or slab or steak might look like a great bargain, but think before you make such a purchase. Very often, cereal, bread, milk, cheese, and fruits go bad before we can eat them. Sometimes, paying a few cents more per ounce is worth it, if it saves you from having to throw out worthless, spoiled foods.
2. A home equity loan is a great thing, because it is tax deductible. Listen, I am no tax expert, but the idea that I should consolidate my credit cards and auto loans into a loan backed by my home is ridiculous. This is your home, your place or rest, your place to have a family and rear your children. Do you really want to risk your home by taking out additional loans against its principle? Dave Ramsey calls these CONsolidation loans. If you take out a H.E.L. to “pay-off” your credit cards, and your charging habits do not change, in a few months or years, you will still owe on the H.E.L. AND you will have new credit card debt. CONsolidation loans don’t “pay-off” ANYTHING. They simple MOVE the debt around.
3. Going into business with a family member will be a great thing. Listen, I love my family. I have great relationships with my family, my wife’s family, and with our extended families. The last thing I want to do is to burden down my family relationships with the pressures of a family business. If you must go into business with a family member, PLEASE, have documentation stating the exact financial and personnel roles that each family member will have. This is absolutely necessary. Nothing will ruin Christmas dinner faster than arguing over family business problems. (Don’t get me started with how crazy you would have to be to loan a family member money…Talk about uncomfortable.)
4. There is “bad” debt, and there is “good” debt. Let’s face it, debt is debt. You owe somebody money for something that you are already using. Now, I will admit that certain items that you borrow money to buy can go up in value, while you are still paying for them. (A house, for example.) But the reality is, it would STILL be going up in value had you paid cash. Just because something is appreciating in value does not mean that borrowing money to purchase it makes since. If I had to categorize debt, I would do so like this. There is really, really stupid debt, like these pay-day, check-cashing scammers. There is really stupid debt, like credit card debt. There is stupid debt, like automobile debt. And there is just plain old debt, like a home loan. But please consider this…all of it is debt…You OWE all of it. Like the Word says… The borrower is slave to the lender. Now, you might be slave to the check-cashing guy, mastercard, visa, or countrywide, but, if you owe somebody money, you are enslaved. FIGHT FIGHT FIGHT. Pay that debt off NOW. Comments welcome.

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