Debt-Free Forever by Gail Vaz-Oxlade (the beginning after the end read novel .TXT) 📕

do a budget together, and if either of you can’t buy that thing you want it’s because “It’s Not in the Budget.” You’re not monitoring each other anymore. The budget becomes the monitor. And since you both agreed on the budget, getting upset with each other doesn’t make much sense.

This works. It’s one of the reasons the people I work with see so much change by the time I’m ready to say buh-bye. As an outside force, they now have someone else to blame for why they can’t spend: me. By the time I’m done, they’re in the habit of checking with the budget before making a spending decision, so they’ve created their own inside force.

I’ve watched people’s lives change significantly because they’ve implemented a budget and have control over where their money is going. I’ve watched their relationships change as they move from being a “parent and child”—as in, “you can’t buy that” or “you’re spending too much money”—to two adults sharing responsibility for their family’s financial health. It works if you do it right. So take the time and see for yourself.

Remember, your budget will require some fine tuning, like a musical instrument, to get it just right. Let it evolve to meet your changing needs.

It’s a good idea to review your budget at least twice a year. Look at where your money went and what you didn’t notice while it was happening to you (like bank charges that snuck up, up, up). Make conscious decisions about what you’re going to do differently, how you’re going to live differently, and what you want from your life.

So often we sleepwalk through our lives, completing tasks by routine, keeping on keeping on. We slip, drift, slide into bad habits, but because we’re just doing same old, same old, we don’t even notice. Expenses creep up, and we fall out of touch with our own financial realities.

Keep your eye on your budget, make adjustments that make sense to you, and keep an eraser handy. And get a calculator!

Budget Worksheet

5

LOSE THE DEBT!

People are always claiming to be serious about becoming debt-free, and then out they go and drop $3 on a coffee, $30 on a book, $110 on a new pair of shoes. The little things we spend money on may improve our lives for the time it takes to consume them, but they do nothing for our long-term goals. If you’re serious about becoming debt-free, you can do it. But as I’ve said earlier, you have to have a plan.

REDUCE YOUR INTEREST COSTS

Before we go any further, it is vitally important that you reduce the interest you’re paying on your debt to as low a rate as you can get. The more money you must spend on interest, the less you have to pay off what you owe.

In Chapter 3 you made a list of all the debt you have, including the interest rates you are paying on each of those debts. Now it’s time to tackle those rates to reduce your interest costs.

On your Debt List, circle all the interest rates above 10%. You are going to attempt to get your costs way, way down. There are four strategies for how to do this:

1. Call and negotiate with each creditor individually to reduce the rate you are paying. This works best when you have just a couple of very high-interest debts.

2. Do a balance transfer to a cheaper form of credit. Whether you use a credit card with a lower rate or a line of credit to pay off your more expensive debt, a balance transfer can be a great way to reduce your costs.

3. Get a consolidation loan, where you lump all the debt together at a lower rate. If you’re walking around with umpteen different sources of credit, then a consolidation loan may be your best bet as long as you can get a loan at a reasonable rate.

4. Ifyou have equity in your home, use that equity to pay off your consumer debt so that you reduce your interest costs. I’m all for using the equity in your home to pay off high-cost debt IF you get rid of all forms of credit and swear on the soul of your cat that you will never, ever, ever spend money you don’t have again. Refinancing debt should not be seen as a way to hide that debt. Nor should it be a way to free up money in your cash flow so you can keep shopping. Refinancing makes sense when you are determined to cut costs and can use the leverage of home equity to achieve your goal.

GAIL’S TIPS

Getting a consolidation loan just for the sake of “consolidation” won’t get you to debt-free any faster. The loan has to reduce your interest costs to make sense. I’ve seen more than a few consolidation loans with whopping interest rates … sometimes higher than on the original credit card or loan. People often assume that “consolidation” means “better.” It only means better if it’s also cheaper!

Strategy 1: Call and Negotiate

If you choose to call and negotiate with your existing creditors for a reduction on your interest rates, you must be very persistent. Very, very persistent. Your call may go something like this: “Hi, my name is Molly McGoo and I want to find a way to lower the interest rate on my credit card.”

Some lenders will give you a lower rate simply because you asked. Some will agree to lower your rate only if they also freeze your account so you cannot continue to use it. Others will say there’s nothing they can do.

If you’re denied a rate reduction, don’t give up. Wait a couple of days and try again. You may reach a more cooperative customer service rep. If it doesn’t work on your second try, escalate the call. Ask for a supervisor. Explain your situation again and then ask, “What