This is part 4 of the “Dig Yourself Out of Debt” Series, published every Thursday. Surfing old posts? You can catch up on Part 3 by clicking here, or view every post in this series by clicking here.
I think it is fair to say that the world loves us to spend money. This in itself is not an issue; spending money keeps the economy revolving, keeps people employed, goods being manufactured and exported and taxes incoming. The problem begins when we start to spend money that is not ours.
Throughout this “Dig Yourself Out of Debt” series, we have worked to pay back money we owe to others because we have borrowed at some point – or at lots of points – in our past. It may have helped pay for home renovation, holidays, a new car or two, or just lavish lifestyles that our incomes did not support alone. In effect we were spending more than we were earning, and taking on debt to cover the difference.
If we are to stop ending up in the same position after working so hard to pay off the debt we are in now, a true shift in perspective is required. Much like when people “go on a diet”, this gives the false impression that at some point the diet will end, and everything will be great. For a while it is, but the weight soon starts creeping back on as we return to old habits. A chocolate bar here, an extra meal out there. Before most dieters know it they weigh more than they did before they started.
Those who succeed over the long-term where weight loss is concerned never went “on a diet”. They engaged themselves in a change of lifestyle. They did not delude themselves that at some point their being good will come to an end and they can return to their old ways. They decided to change their relationship with food and exercise forever.
Getting out of debt is not a short-term fix. It is not a short temporary hardship – it requires a complete monetary rethink, much like a person who maintains successful weight loss changed their entire lifestyle. Live according to your means, not up to your expectations. If your net (take home) pay is £850 a month then you need to realise that a lavish lifestyle is just not yours to be grasping. Until we acknowledge this reality we will never break our spending addiction.
Any attempt to live like you earn 3x the amount you do will simply end up returning you to a mountain of barely serviceable debt. Spending this will make you no happier than if you simply had not even bothered trying to delude yourself and others in the first place.
With that in mind, here is my ‘Debt Psychology 101′.
Stop keeping up with the Jones’. Our society places an artificial need and desire to “one up” our neighbours and social peers. If your next door neighbour drives a Mercedes, then your ‘need’ to go out and buy a Lexus is niggling away at you day in, day out because we don’t like being perceived as inferior to others. Does your friend have an iPhone 3G? How many times have you wanted to go out and get yourself a 3G S to get one better than him?
Appearance is not everything. Your neighbours may have two Mercedes and a Land Rover Sport on their driveway, but they have likely sunk themselves into debt servitude to do so as I highly doubt that they have gone and purchased them outright, especially in the current economic climate. They will be saddled with debt from their desire to put out a perception of wealth that is as hollow as a malteser. It might appear hard on the outside, but it’s full of holes on the inside. Their income may be significantly higher than yours, but it is likely their debt is significantly higher as well. Side-by-side, you are probably better off than they are.
I drive a 7 year old car that I could replace with something newer if I wanted to give out a better appearance of my financial position. I keep driving my old car because it does what it is supposed to do; it is cheap to run and all the time I hold off buying a new car, I accumulate real wealth (or do not sink myself deeper into debt). Either is a good thing.
Celebrate real wealth. What would you rather do? Give the appearance of wealth, or have wealth? One of the best life lessons I have learned from my journey to become debt free is that consumerism is not all it is cracked up to be, and I have disconnected myself from that lifestyle completely.
I appreciate what I have already, and use it to the best of its ability. Yes I would like an iPhone, and if someone offered me one for free I would take it as there is no denying – it is good technology. But I do not desire one, and I certainly will not be buying one even after I am debt free. Why? Because I do not need it. Yes it would increase my friends’ perception of me and my financial position, but I do not care what others think of my financial position. I would rather know that I am financially secure, than give out that appearance.
Beware the power of advertising. For our entire lives up to this point and beyond, we have been and will continue to be barraged by media advertising anything and everything, and all saying that “your life will be better with Product X” or the fact that “the 2009 Product X is significantly better than the 2008 Product X and anyone who has not rushed out and upgraded yet is poor, stupid, or a combination thereof”.
One prime example is L’Oréal: “Because you’re worth it”. Really? If I do not buy this product then someone else is worth more than me?
You may think I jest, but the next time you see advertising of any sort, disconnect, step back, and really analyse what it is saying about whatever is being promoted. Once you start to see through this, your consumerist nature diminishes and you find more money appearing in your bank account at the end of each month.
Less is more. I am happier now than I have ever been at any point in my life. That is despite the fact I am getting divorced, despite the fact I am in debt, and despite the fact I acknowledge my job is potentially at risk. Why? Because I have got off the carousel of consumer debt accumulation and started to appreciate what I do have. I have my health, I have family and friends, and I make what things I do buy work that much harder for me. These days I am much more content with a library book or a DVD from my LoveFilm subscription than if I went and splashed out on a DVD boxset every week.
Some people are naturally frugal courtesy of their upbringing. I was a spoiled child if I am honest, and I paid for that later on in life by believing I could still have everything I wanted now, even though it was not supported by my income. When I was married the situation just became even worse.
If this sounds like you, and the reason you got into debt was simply spending more than you earn courtesy of consumerist desires, you can undo that. It is possible to change; I am living proof of that.
Of course this does not take into account the other reasons of being in debt. Sometimes, you are just down on your luck and circumstances conspire against you at the worst possible moments. Only you can decide which one is really the reason you are in debt if you are.
Identify your own reasons, spell them out, and work on changing your lifestyle accordingly. Providing you live by a simple mantra, debt will never be a problem again:
Live according to your means, not up to your expectations.