How to Become Debt Free

What do you value in life? 

Often when I ask people that question, they have to stop and really think about it.

Hmm, what do I value?  I can hear the wheels turn in their minds as they begin to think about what matters most to them.

Values are the part of you which is you.  Your values are what you are naturally inclined to do, are eager to do, drawn to without effort or goal setting.  For example, if you value family, you naturally spend time with them.  You don’t have to force yourself to spend time together; it’s as natural as breathing in and out.

Why I ask and why I want you to think about it is because a values-based financial recovery process is going to make the journey a whole lot easier.

When we live a life based on our values, when our values are aligned with our goals, when we are able to get what we want and get our needs met then we are fulfilled.  Doesn’t living a fulfilled life sound fantastic?

Fulfillment is beyond satisfaction and happiness.  It’s that long lasting feeling of total authenticity — of you being totally you.

So, what do you value?

Everything you do, think, and feel is formed by your values.  Values are never things that you “should do.”  “Shoulds” are choices that you make based on the needs and opinions of other people.  For example, “I should go visit Joe in the hospital.”  Maybe you hate hospitals and sending a nice flower arrangement and phone call would suffice.  See how a “should” is not a value in this example?

If you say “need” before a statement then it’s a need, not a value – simple as that.  If you are doing something in order to get something in return, then it’s also not a value.  Lastly, if you want something badly but it won’t come easily, then it’s probably not a value but rather a “should.”

Here’s an exercise you can do to help hone in on your values.

  1. Sit down and identify 20 values.  Remember, don’t include shoulds, needs or duties. You may have a hard time with this.
  2. Now, review the list and remove any shoulds, needs and duties you included.
  3. Evaluate your values and pick your top 5.
  4. Now think about your financial situation. How do these values align with your financial plan?

Are you doing work that is fully aligned with your values?  If you value family and want to spend more time with them, how will getting out of debt help you live that value more fully?

When you begin to see your values and tie it to your financial plan, it becomes easy to keep your eye on the ball and move closer and closer towards true financial recovery.

Remember, a life fully oriented around values is an easy, natural life.  And doesn’t that sound wonderful?

So, you’re thinking of getting married or maybe you’ve already said the “I Do’s”.  When you take your spouse in good time and bad, are you saying “I Do” to their bad credit, too?  I mean will you be stuck holding the bag to their credit woes just because you marry him?

Before we get to the facts of the matter, I highly encourage you to find out BEFORE you say “I Do” what is the real deal behind your future spouses credit situation.  It could really save you a ton of heart ache and lost cash in the long run.

Now for the facts:

1.  When you get married your credit histories stay separate.  They don’t become “one” just because you’ve tied the knot.  There is no joint credit score and no joint credit report.  Your credit score remains separate from his and long with your credit report.

2.  If he has bad credit you won’t automatically be affected.  However, his bad credit can have a direct impact  if you attempt to get a mortgage approved, or other type of loan. It can even affect the interest rate you pay if his credit is sub par.  Of course if you co-sign any loans or open up any joint accounts the accounts will show on your credit report too.  If he then defaults or maxes out the credit cards it could negatively impact your credit score.

3.  Just because you get married doesn’t automatically mean all your accounts will be joint/shared accounts. That decision is up to you and your spouse.  If you have a future spouse with bad credit it’s always wise to fully discuss the circumstances with your fiance before you tie the knot.

As always be smart about your money!

Myth 3: When we marry, we’ll share all accounts.

Getting married doesn’t automatically merge any of your financial accounts; that decision is up to you and your spouse. But be smart and discuss each other’s credit history and financial position before tying the knot. Knowing the truth helps prepare you both to tackle any future financial strain.

Guilt comes in all forms.  Some feel guilty for overspending while others feel the guilt for not saving.  But the guilt I’m referring to is the guilt one feels when they make more money.

I know, you’re initial reaction might be, “Who would feel guilty making more money?’  But, believe me many women feel fearful and guilty about wanting to make more money.  It’s not logical, but it is real.

The guilty feelings usually are focused around concern for how others will react to their new earning capacity.  Will their friends be jealous?  As they begin to make more money they over shoot their husbands earnings and are concerned it will cause a rift in their relationship.

The issues with spouses are very touchy ones.  When I work with a business owner who develops a bold and daring money goal and she suddenly realizes that she’s going to be making more that her spouse makes she gets nervous and concerned.  How’s he going to react?  Is he going to be okay with it?  Is making more going to emasculate him in some way or disempower him?  I hear this over and over again from women I work with.  It is a real concern.

So how do we overcome that inner conflict to make more money and enjoy all the goodies life has to offer with how much actually flows into our bank accounts?

Here are three strategies to help you banish the fear and guilt about making more money:

Don’t Let The Past Dictate Your Future

We have all made mistakes.  Spent too much, saved too little, didn’t invest like we should have.  We’ve all made decisions we’ve regretted.  The difference her is it was a mistake in the PAST.  It only has power over you if you continue to make the same mistake her in the present.

The beauty behind making a mistake is the great learning opportunity we are presented with.  So forgive yourself, move on and take what you’ve learned and apply it to your future.

Pay Attention To Your Money Now

If you don’t have the best habits with money, nows the time to do something about it before more money comes into your life.

A portion of every dollar earned she be earmarked towards these four areas:

  • Paying down debt
  • Saving
  • Investing
  • Improving your lifestyle

This way as greater earnings are achieved you have a clear plan for what the money will go towards.

Don’t Compromise Yourself

Holding yourself back from making more money doesn’t’ serve you or others.  Failing to stand in your power around money is just plain foolish.  Stand firm in your commitment to yourself and your future wealth.

There’s Nothing Wrong With Making More Money; It’s Your Right

Money is a reflection of your self worth and your own personal growth.  If you’re worried about having and making more, nows the time to challenge that belief.  Trust in yourself and your spiritual right to make more.

This morning, I was reading one of the books I started last week and got to a chapter that was discussing wills and trusts. So, I decided to run downstairs to my office and pull out my will.

To my shock and horror I hadn’t updated my will and trust since 2001! Ten years since I gave thought to what and how I would leave my estate.

What shocked me so much was just how out of date it was.

My daughter was a minor at this point so she wasn’t named my executor and a guardian was named. Two issues that are not longer needed.

The point of this quick post is to encourage you to get your will and trust out today and see what needs to be updated. Then contact your attorney and set up a time to take care of it immediately.

Protecting your assets and your family are two important and critical steps to your overall financial plan.

Don’t make the mistake I made and ignore these two aspects any longer!

What is it about us smart, independent women who still relish in the myth that our Prince Charming is coming to rescue us from our financial situations?

Most of us were raised to believe this myth –  heck to fully embrace this myth.  Yet somewhere deep inside of us we feel we should be above the myth but realize it still lingers in the background.

I know this was true for me.  My parents never explicitly told me that a man would take care of me, but they did encourage the idea of settling down and having a family from a very young age.  When I became pregnant at 20 I firmly busted that bubble and all subsequent bubbles that a man would be there to take care of me.

But the Prince Charming myth isn’t just about the man.  If you daydream that winning the lottery will rescue from your financial woes, then your pretty much barking up the same tree.

Anytime we secretly wish something or someone will end our financial nightmare we are living in a fantasy world.

The most important financial decision you will ever make is working at dispelling and eliminating this myth.  Without bidding adieu to it, you will still be stuck in a mindset that won’t allow you to gain control of your financial destiny.

There’s no singular right way to accomplish this task.  But, the hard core realization usually occurs when three things happen:

  1. We are willing to imagine the possibility that Prince Charming may never show up for us.  Statically speaking we will all be faced having to manage our finances alone at some point in our lives whether it be from divorce, being widowed, or due to never marrying.
  2. We must see the truth of the situation:  That no one will do this for you.
  3. We must recognize that we have the power within ourselves and are capable of doing this for ourselves.

But just like any other recover process, it won’t happen in one full swoop and even when you feel like you have finally reached the point were you fully accept Prince Charming isn’t going to take care of this for you,  some life circumstance will rear it’s ugly head and have you wishing once again for him to appear.

But don’t be discouraged as this is part of the process.  Each time you have that thought or revert to your old desire creates an opportunity for you to have another breakthrough.  To go deeper than ever before.

This is just one part of the process of gaining control over your finances that include emotional, psychological and strategic elements.  But saying bye-bye to the myth is an essential component for any woman who is ready for wealth.

We all want to make more money.  I know this from the countless women I have coached over the years who have told me so.  The advice I give them on how to change their pricing strategies and how to creatively market their services seems simple enough at first glance.

So I am often shocked and surprised when even after they follow my advice they still don’t seem to have enough money. So why is it even though a women entrepreneur can make more money it doesn’t necessarily mean she will keep more money?

I know, it sounds unbelievable at first.  I mean if you’re working harder and harder at becoming successful why does it seem to just slip through your fingers and out of your bank account?

Our relationship with money is a complex thing.  The reality is nearly ALL women have a secret, haunting issues with money that causes them to freak out and give away their power with money.  And when you lose your power, the cash is sure to follow.

Most possess a fear that somehow, having more money will change them or change their life in some way they can’t control.

So, while on the outside they do everything they can to be successful, on the inside, their mindset and beliefs are sabotaging their efforts.

If you, too, have created that endless struggle with never seeming to have enough money, even when you’re making more, then I  know  you’ll find these 3 tips really helpful in getting to the bottom of what’s really going on.

Money Will Change You

A lot of women are afraid they’ll turn into someone their not.  But truth be told, money doesn’t change you in that way.  It will magnify your values and your character but not change you into someone completely different.  If you were generous before you will be more so with more cash.

On the flip side if there are traits and values about yourself that you don’t particularly like then now’s the time to do something about them before you have more money.  Take the time to express your positive characteristics now and stand firm in what you stand for and eventually you will see that money will only enhance your quality of your life, not turn you into a mean and heartless bitch.

Who Are You Afraid Of Offending?

I can tell you from experience that it’s not uncommon to have someone in your life who you think will be upset, jealous, threatened or disturbed in some way if you make more money.  Typically it’s a family member, but it could just as easily be a close friend too.

Does this feel vaguely familiar?  Ok, well it’s just fear you’re feeling, so go ahead and acknowledge the fear. If you really dig deep here this person more than likely wants the best for you.  They want you to be secure, safe, happy, etc.  So, focus on the positive intentions they have for you instead of focusing on what you’re afraid of.

What’s The Money For?

So, what’s your big money why?  If you don’t know, figure it out.

Making more is great and it allows you to indulge in life’s luxuries.  But once you have indulged a few times eventually you’ll want to connect to your big why which has to do with your heart and spirit.  Maybe you want to finally own a home at the ocean or pay for your grandchild’s college education.

Knowing exactly and specifically what larger amounts of money are slotted for will help you value keeping more of it instead of splurging it on something that won’t change your life in any meaningful way.

Money Equals Self Growth

Do you want to grow as a person?  Well money is the perfect catalyst for your self growth and development.  Not only will you delight in how advanced you become but your new income will give you the opportunity to make a profound and positive difference in the lives of everyone around you.

According to the National Bureau of Economic Research, nearly half of all Americans are considered “financially fragile.”  What does that mean?  It means  they couldn’t come up with $2,000 if they needed to unexpectedly in the next month, or would have to resort to desperate measures to come up with the money.

What I found most interesting about the paper is that you’d think it would just be a low-income problem. It’s not.  A surprising number of middle class families – including 25 percent of those earning between $75,000 and $100,000 — are also “fragile.”  What’s even more distressing is that it is a bigger problem in America than in many other countries.

So, how do we fix it?  According to Jean Chatsky, who’s done the research, if you want to save money – and keep it out of reach, you must move it out of your spending account and into a place where there is a perceived barrier to getting at it.  That’s why 401K’s work so well, because you can’t get at the money once it’s moved out of your paycheck.

Internet banking is a good choice to replicate this affect. (Ally Bank and ING Direct are both good choices.  They don’t have minimum account fees AND they pay higher than average interest rates.)   In order to get your money out, you have to transfer the money back to your checking account – which takes a couple of days.  There in lies the barrier.  You’re really going to have to think about moving that money before you actually  make the move, and wait a few days for the cash.

Additionally, you should keep a separate account for emergencies so that you can keep tabs of how much you’re saving in your emergency fund.  Lumping  it all together with other money for savings will give you a false sense of how much money you actually have available for emergencies.

As a result of living in New England, many of us have older homes with a more historic look and feel and flavor. While these houses are built with great character and high attention to detail, they do not have the same energy efficiency that newer, more modern homes have. A lack of sufficient insulation, older single pane windows, out of date electrical systems, out of date heating systems and hot water heaters can cause our energy bills to skyrocket.

I use that example often to illustrate conceptually what most people seem to intrinsically realize but NEVER fix without help- the idea that their personal finances are often suffering from similar inefficiencies. Every minute of every day, you and your friends and your family and your coworkers LOSE your money to institutions and governments in the form of taxes, interest payments and fees, resulting in a very inefficient and very drafty financial house. That wasted money is lost forever and cannot be redeployed back into your own financial world.

By working with a professional to re-engineer your financial world you are able to avoid the trap of financial disorganization, recapture what is currently being lost and take control of your financial future.

It is not atypical for the people that I typically work with to be paying 25-30 percent or more of their income to taxes when you factor their various levels of income, Social Security, real estate taxes, excise taxes, etc. – all the while paying out an additional 25-30 percent or more in debt payments, such as mortgage, auto loan, and credit card payments.

What is your current savings rate? The average American family saves approximately ZERO on an annual basis, which frankly, is terrifying to me. What are you saving? Are you at 5%? 10%? More? In order to maintain your current standard of living in retirement you NEED to save 15-20% of your current income. Where will this increase in savings come from? What if you employed some strategies with the goal of dropping your tax liabilities 3-5 percentage points? What if by changing your own order of financial operations you were able to manage personal debt in a different manner and drop that outflow 3-5 percent as well?

Imagine the effects of saving another 6-10% of your income growing and compounding over the course of your working career. By employing small, SIMPLE changes, you could potentially build a robust savings account without digging into to your pocket and sacrificing your current lifestyle!

As a society, we seem to have been trained to search high and low for greater returns on our investment portfolio, leaving no stone unturned. Instead of taking more risk to only POTENTIALLY receive more returns, why not re-engineer your finances in such a way that you recapture what is being lost while taking on less risk and have a far more certain outcome?

It is your money, take it back!

Dealing with Debt Collectors

Nobody likes the idea of dealing with creditors.  I know I never met a collection person who was either kind or nice to me when I was struggling to pay my bills.  They usually approached the conversation in attack mode which of course put me on the defensive and it seemed that no matter what my answer it was never good enough.

If you’re faced with creditors here’s a couple of tips I learned along the way that made dealing with these difficult people a little more tolerable.

1. Take Personal Responsibility

The fact of the matter is that most of us end up in debt with collectors breathing down our necks because we made some bad decisions and choices.  You’ve got stop blaming other people for your financial circumstances and first acknowledge that you made this mess  and now you’ll take responsibility and start cleaning it up.

Blame is understandable; it’s almost inevitable that you’ll want to blame but don’t.  Instead forgive yourself for your past financial transgressions and keep moving forward.

Stop ignoring the calls and letters and start engaging with your creditors to come up with a plan to pay your debt.  Standing in your power in this way is worth more to your integrity than playing the hide and avoid game.

2. Be Prepared

Ok, so you’re ready to take responsibility but don’t pick up the phone without a plan.

Prior to my financial meltdown I had always been on time with my payments and never had late fees.  I did have a big balance, but I still paid each month even if it was just the minimum.  So before you call figure out what you owe, who you owe and how much you can realistically afford to pay each of them.

Try to do this before they start the collection process as creditors would rather have you pay a small amount against your bill each month than have to start the expensive collections process.

Additionally be prepared to explain the reason you can’t pay; your current income and prospects for future income; other obligations (bills) that you have; and your plans to bring this debt up-to-date and keep it current, including the amount you’ll be able to pay each month.

3.  Offer Solutions

Creditors may not willing share with you options that could solve your problem and theirs, so know before you call what options might work best in your situation.

You can reduce the monthly payment; refinance the loan; defer payments for short time if you expect that your income will increase in the near future; pay only the interest on the loan until you can resume making monthly payments or voluntarily surrender an item you purchased on credit.

Other options that don’t involve your creditor include selling items and using the cash to pay your creditors; or having a yard sale and using those funds to pay balances.

No matter what option you choose you are ultimately responsible to pay your balances to your creditors.

Remember, taking responsibility and finding a solution will ease the fear and anxiety of dealing with less than friendly debt collectors.  Get your head out of the sand and establish your plan of action today.

Post Note:  For those considering bankruptcy, please consult a bankruptcy attorney in your area so you can fully understand all the ramifications of the bankruptcy process.