Debt Free and Fancy Free

YIPPEEEE!!!! Get out the cocktail glasses your mother-in-law gave you two christmases ago, and let's celebrate.  You paid off your "extra" debt.  You've met your 1st financial goal, and nothing can stop you from achieving your other life goals!

Being debt free and staying that way are to separate ideas.  You have to work just as hard to stay out of debt as you did getting out of debt.  It's such an easy pit to fall into.  Don't let it happen the vicious cycle continue to surround you. 

See how quickly debt free can become debt full!

Debt Free for Life or for Right Now?

What you are doing next depends upon the extent of debt free you have achieved.  For most of us, that does not mean no more house, transportation, or living expenses, but

it does mean less money going out the door on interest payments.  If you're completely debt free, you've won the lottery or a long-distanced relative left you a fortune, then what are you doing here...get to the beach and surf the waves instead of the net.  If you're debt free, as in, all my credit card debt is paid off, then keep reading. 

So, you've learned your lesson about debt, and you've decided to keep the credit cards.  After all, you promised yourself that you would never be in that situation again. Well, believe it or not, there are several people, just like you who have sworn to themselves that once they got out of their horrible financial rut, then they would NEVER get in that situation again. (I know a few personally.)

One of my closest friends, Lori, who comes from a large farming family, maxed out her credit cards when she was 18.  She started a high paying job right out of high school and had credit card companies throwing offers at her.  How could she resist?  The family had little spending money when she was growing up.  There were 11 kids after all.  This was her ticket to life.  She could not only buy herself all the things she never had, but she could buy all of her nieces and nephews the "coolest" (and by that, I mean, most expensive) presents ever.  She didn't stop there; she bought her brother-in-law a suit for a wedding and her mother and mentally-challenged sister some new clothes.  You certainly can't blame her for wanting  to give to those who didn't have, but pretty soon she was in debt...$10,000 in credit card debt, living in an apartment, and driving a 10+ year old vehicle.

This is wear the swearing started.  She swore at herself, and then she swore to herself, "if I ever get out of this mess, then I promise I will NEVER let myself get back into this situation".  She talked, and whined, and cried to her older brother, and he gave in.  He took her to the bank and co-signed on a consolidation loan for Lori.  All was well.  They worked out a repayment schedule that Lori could afford and Rick would agree to, and she paid off her credit card debt. 

The Beginning...

Lori got out of debt, bought a new house with a big back yard (and a big mortgage payment), bought a newer vehicle, and had $0 credit card debt.  Then, it happened.    She went on a year-long spending spree.  At first she just purchased items that she "needed".  For instance, her new house "needed" new furniture.  Her new big back yard "needed" to be mowed with a riding mower, but not just any mower.  It had to be the best...a John Deere with headlights.  I'm not sure how often she planned on mowing in the dark, but I knew this was another one of those "necessities".  Then, the washing machine quit working, the skylight started leaking, and the air conditioner needed some repair work.  Within a year and a half, she managed to put herself into of credit card debt...$11,000 worth.

The debt free life was over...or was it?

Don't Make The Same Mistakes Lori Did!

Lori didn't go wrong when she consolidated her debt.  She didn't ruin her debt free life when she kept the credit cards.  However, she also didn't change her spending habits,  set any new goals, track her spending, or make a budget.  She also gave to her family things they didn't have, but she gave without any regard for herself.  She did the same things she did before, and she wound up in the same situation. 

It's very easy to do.  You consolidate your debt and get rid of those pesky credit card bills, and then you start to forget what it was like, or you tell yourself you're just going to charge this one item and pay it off, and before you know it, you're in the same old pair of shoes, walking down the same old dusty road--fighting to see a way out. 

Now, did you notice any positive things Lori did (to improve her finances)?  The most important thing she wisely chose to do was, invest in property...her home.  Whether she should have purchased this home or one with a smaller mortgage goes beyond the scope of this page.  The key to having invested in real estate is that it typically appreciates, or increases its value over time.  She has a lot of potential to make some money should she decide to sell her house in the future, but it also gives her a way to get out of debt and pay a lower interest rate than other types of consolidation loans right now.  This type of loan is called a home equity loan. 

Conclusion:

You have already conquered half of the battle of being debt free.  The other side is staying debt free.  It's not impossible, as long as you realize it's something you must work at.  Change your spending habits, set any new goals, keep track of your spending, and spend your money on your future...invest.

I hope this article has given you some ideas on how to be debt free for life!