3 Holiday Rules for Debt Management

More than one hundred thousand people sought help on the internet in November alone for managing debt. For multiplied thousands debt snowballs into an uncontrollable menacing mass growing like a cancer to swallow up sanity, security and relationships. Many experts agree that “money problems” are the number one reason for divorce in America. The peer pressure of the holidays brings the reality of debt home for thousands or even millions every year. One coaching client of mine went to the bank to borrow money for holiday shopping only to find that their family’s debt to income ratio was so high that the bank wouldn’t consider giving them a loan. After applying to several high interest credit cards and being denied she came to me in one of my seminars for advice. This article summarizes the advice I gave her.

Clarify Your Values

The first rule in managing debt is: clarify your values and match your spending habits. Without core values it is highly improbable that you will make consistent sound decisions at all, especially financial decisions. The most common reason for failure in any personal or business endeavor is the absence of core values. One’s core values ultimately drive behavior. Missing or weak core values will result in inconsistencies, moodiness and unreasonable choices. Core values provide a foundation from which you can make decisions; this foundation provides stability and consistency.

In creating your financial values you should identify which values are absolute versus those that are relative. Absolute values may never be challenged or compromised, so take plenty of time to shape them. Examples of likely absolute values might sound like this; “The first ten percent of my profits will be given to God.” or “The second ten percent of my profits will be put into savings.” A relative value might sound like this; “Money in savings is off limits.” This value may be relative in that an emergency may require that we dip into savings. Your financial values must be your own; you will not be as committed to those you don’t own. If you have a spouse or significant other you must agree on these values. Answering the following questions may help you create some clarity about what you really want and what you need to do to get there.

What are my financial plans for the future?
How do my current spending habits support or sabotage my desired future?
What spending habits do I already know I need to change?
How can I change them?
How important is saving money to me?
What needs or desires merit dipping into my savings?
How much money do I need in savings to feel secure?

After answering these questions you should read the articles “3 Reasons Highly Successful People and Organizations Build Core Values” and “5 Values for Lifelong Success” at www.charlesspeaks.com/billets.asp. Once you understand core values and the benefit to your financial future consider creating a financial mission statement at http://www.nightingale.com/tmission_selecttype.asp?Source=INLACx133v1.

Create Measures and Budgets

Put simply, you can’t manage what you can’t measure. Most people live from pay check to pay check with no idea of how much they actually over spend on a daily, weekly or monthly basis. If they are a little short at the end of the week they will simply pull out the plastic and charge a tank of gas to get them through to the next paycheck; after all it’ll only be about twenty dollars. As a result of measureless spending millions find they are bankrupt. A critical step toward financial peace is creating measures and budgets.

You need to know three things. How much do you bring home? How much do you spend? What spending can you eliminate or reduce painlessly? In determining your bring home pay you may be forced to simply calculate an average due to variables in your income, in doing so be thorough and realistic. To identify what you spend include everything. Record what I call frivolous spending such as candy and drinks at the gas station and find your average frivolous spending amount. This frivolous spending is the first place to look for painless spending cuts. Spending cuts can include elimination of unneeded expenses and spending, bargain shopping or frugal recycling.

Make sure saving is a part of your budget. I recommend a three part saving strategy: save for emergencies, save for retirement and save for emotional spending. Once you identify how much you can cut your spending, commit to cutting and plan how you will use what you’re saving. Allocate a portion for your three part saving plan no matter how small the amount. Use the rest to immediately start paying extra on the debt you have.

Take Immediate Aggressive Action

Start shopping for lower or no interest lenders to carry your debt. Consider consolidation. Commit to “No More Debt” no matter what may become available. Negotiate payments and terms with your lenders; explain your circumstances and ask for favors, you won’t know what you can get until you ask.

Commit to a frugal holiday season by making gifts and cards; this can be great family time. Commit to buying no unneeded gifts and to bargain shopping. DO NOT USE CREDIT CARDS FOR HOLIDAY SPENDING. If you have to do that to impress or convince another of your love they aren’t worth it.

For additional information, support or coaching contact Charles Carpenter at charles@charlesspeaks.com

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