The One Way to Never Fall Into Debt Again

by Vincent King · 65 comments

falling in debtDebt is literally a four letter word; it just also happens to mean you owe money.

Many Americans have a dream they’ll never realize: living without debt. Yet, the dream is possible for nearly everyone – just be prepared for the sea change of behavior required to make it happen. If you are unprepared, your ship will never make it to the safe harbor of paradise, and you will crash upon the jagged rocks of financial ruin.

Follow these simple steps to make your dreams of a safe financial future come true, and steer clear of financial ruin.

Make Up Your Mind

Many people fall into debt because they grow complacent, spending above and beyond their means, living from paycheck to paycheck with barely enough to make the bills. They don’t have enough to pay for dinner out on Friday, the new clothes that go with it, or the movie after.

Yet they do it anyway, and on the credit card the spending goes. The honest, painful truth is that if you don’t have the money for those things, you shouldn’t be doing them. Learning to be satisfied with your limitations is difficult. You want to be accepted by your personal crowd, but if your crowd’s habits are decaying your bank balance one bad habit at a time, you have to ask yourself if the consequences are really worth it.

Once you decide that the lush greens of financial security offer an abundance that the Jones can’t match, then the seas get glassy and the waters are far easier to ease through.

Say Goodbye

Once you’ve made up your mind to live within the black, it’s time to say goodbye to your plastic.

Either cut them, cancel them, or bury them far, far away. You may even want to freeze your credit cards. You can’t open the dam for the credit flood waters if you don’t have access to it. Don’t panic. It’ll be tough at first to say goodbye because you’ll feel like you’re being left without a life preserver, but the truth is you’ll be gaining a lifeboat in exchange.

Set your course before you set out on your journey.

Pay Off Your Debt First

Canceling your card was the first step. Now you must be proactive about slashing it to zero. Snowballing is an extremely effective way to quickly demolish your debt. Establish your payoff plan and stick to it. This debt is now a “need” on your financial map. Here are 25 more ways to get you out of debt.

You have a plan for paying off your credit cards, now lay out your map to help you get from paycheck A to paycheck B.

Lay Out Your Map

What are your needs? What are your wants?

By organizing your finances by needs and wants on a paycheck to paycheck scale, you can pay off the needs first, then have whatever is left for you. When you draw your financial map, classify bills, debts, and savings as needs, don’t forget to calculate things like clothes and the once in a while purchases too. Otherwise, your budget won’t resemble reality.

The only rule is to determine needs from wants when you allot your funds.

Track Your Money

The beauty of online bill pay is that using it for everything keeps you from running blindly through your budget while showing you exactly what’s happening with your balance. Without credit or debit cards sucking the life from your account, it’s one way in and two ways out – cash and bill pay.

Use bill pay for everything and withdraw your cash for the extras bill pay can’t handle such as gas and petty expenses. Once your cash is gone. You’re done. No more spending until the next paycheck is securely in your account.

Remember to withdraw enough cash to get you through. Allot the amount of cash required for groceries, fuel, kid’s needs, and anything else you may need for the period. If you know your child needs new clothes, establish a plan for that spending and only use the cash you have readily available.

Some people label envelopes so they can distribute the cash they need to the places they need it without cutting into funds from another category. Do whatever works for your mind and your system. The only unbreakable rule is that you can’t spend beyond the cash you have, so you must manage it well.

Once you have learned to live within your means and have your debt under control, life will be sweeter and you’ll never return to the choppy waters of too much debt again.

If you’ve climbed your way out of debt, what’s your trick to staying out?

Here are three options that NOLO points out:

Whatever you do, don’t ignore your debt.

First, you need to be honest with yourself about your current situation. Read all the unopened mail, return the collection calls to find out what you owe to whom, and make a detailed list. If you know what you owe, you can make an informed decision about what your best option is at this point.

Option 1: Wait it Out

If you’re unemployed, and the prospects of getting a job in the near future are grim, you may elect to do nothing with your current debt if you don’t own any significant property. This is the old “you can’t get blood out of a turnip” approach – if you don’t have any assets to seize and no income to garnish you don’t have to do anything with your current debt. You won’t go to jail (even if you owe the IRS), and you won’t be denied basic necessities like clothing, food, unemployment benefits, disability benefits, or food stamps and DJFS assistance. New laws state that you may be evicted for nonpayment in certain instances, but a visit to DJFS (Department of Job and Family Services) can help you get emergency housing. If you have few possessions, it’s not likely that your creditors will sue for debts owed since they aren’t likely to get enough to cover their legal expenses, let alone the amount of money owed.

Basic Healthcare
If you don’t have health insurance, make a visit to DJFS for an evaluation on getting Medicaid or Medicare started. If you’re opposed to public assistance, keep in mind that emergency rooms in the U.S. are required by law to provide basic medical care to all individuals, even those who cannot pay. This does not apply to private practices like your family doctor, but it means you won’t die of a burst appendix because you can’t pay for treatment.

Option 2: Tread Water

Another option is to slowly start to dig your way out of debt. You can sell a car, truck, boat, jewelry, gun collection, or other valuable assets in your possession to raise funds for your debt. If your 401K didn’t end up in the toilet, you can borrow money from your retirement fund to help pay for your debts. You’ll also need to cut back on expenses as much as possible (if you’re not doing so already).  Learn to live frugally. Cutting expenses also demonstrates to your creditors that you are making a concerted effort to correct your financial situation.

Stay away from PayDay Loans, Tax Refund loans, borrowing from a finance company, pawnshops, and debt consolidation companies. If you negotiate a debt settlement with a creditor for more than $600 in principle value (unless you’re filing for bankruptcy), be aware that the IRS will expect you to report this amount as income on your next year’s tax return.

Get Help
If you need help negotiating debt payments or making sense of your bills, call the United Way, your local church, or a Credit Counseling agency for help. You can also visit your local library and speak to the librarian about the resources available to help you learn about getting out of debt.

Option 3: The Big B

If you decide that your debt is overwhelming, you can opt to file for personal bankruptcy. Under the law, you have two options: Chapter 7 Bankruptcy and Chapter 13 Bankruptcy.

Chapter 7 Bankruptcy
Under Chapter 7 Bankruptcy, your creditors are required by law to stop contacting you to attempt to collect debts. This puts an immediate stop to all harassing phone calls and mail. Simply tell the caller to contact your bankruptcy lawyer for all future correspondence. Creditors cannot garnish your wages, shut off your utilities due to nonpayment, or seize your assets without approval from the court. The courts may seize some of your personal property, like a second vehicle or second home, or that new 40” plasma TV in the living room. While in proceedings, you will not be able to pay off any debts or sell any property. After the court process is finished, your debts will be discharged, excluding certain things like student loans, child support, alimony, income tax, or fees from illegal activities.

Chapter 13 Bankruptcy
Chapter 13 Bankruptcy is less harsh than Chapter 7. This type of bankruptcy essential serves to buy you a little time in paying back your debts. Under Chapter 13, you have between three and five years to pay back your debts in regular monthly payments. This is a good option for many consumers who are falling behind in payments and have recently had a cut in wages but are still working.

While these are the three main options recommended by NOLO for those in serious debt, there are other options available (like taking out a mortgage for those with equity in their home).

If you’ve been (or are currently) in a debt-filled state of affairs before, what strategies and practical advice helped you in your situation?

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{ read the comments below or add one }

  • Lyn says:

    Most people forget that the price of the item they just bought (or the meal they just ate) went up 20 or 25% (depending on interest rate on your card) if they don’t pay the bill in full and on time!

    • Roberto says:

      Most people feel that they will be able to pay off the credit card bill at the end of the month each and every month. What those same people fail to realize or plan for is when “Murphy” comes to pay a visit and the money you may have had set aside to pay the credit card off is now used for the emergency that presented itself.

      And now that you no longer have the money to pay off the card as originally planned, the vicious cycle of trying to rob Peter to pay Paul begins…

  • Bogdan says:

    I’m all for tracking your spending, living within your means and what not. But making a blanket statement that credit cards are bad is not smart financial advice. For people with poor impulse control, yes, I agree. If you have the discipline to know that you will have the money there when you pay off your balance in full every month, then by all means use your credit card.

    I’m not wealthy by any means and live very modestly, and I put almost all my purchases on a credit card. And the second I receive my statement, I pay off the full balance and have never occurred interest charges on a credit card in my life.

    • Roberto says:


      I think the key word there is “discipline.” Quite frankly, however, the credit card companies themselves know that Americans in general lack that self discipline and hence the companies can make a killing. People like you are few and far between. This is why gurus come out of the woodwork claiming that credit card companies are the enemies, and credit cards are their main weapons.

      Congrats on having a good head on your shoulders, but don’t be too hard on the rest of us for trying to conquer our demon of debt the best way we can.

    • dale says:

      Why don’t you just use a debit card and ignore the credit predators altogether?

  • dani says:

    I helped my parents to get out of their debts by cutting all of their credit cards and came with a payment plan which took around 3 years until they finally clean. I agree that it needs the change in the way we think to stay out of debt.

    • David @ says:

      Wow good for you. Your success story is the first one ever that I’ve heard about how a child was able to help their parents get out of debt.


  • mike says:

    It is financial awareness that we are lacking.

    Somehow we are not taught such matters at school even though it is a basic need when you leave. Managing money and planning financially should be taught in schools but the neglect that. If the population is in the dark then they are more likely to hand hard earned money over to a ‘professional’ financial advisor to manage the money for them. If the advisor knew how to make money why would he be working that job though?

    There really is only one way to go, educate yourself!

    I created a financial planning tool and I have some free tips to creating wealth (as opposed to giving it away), this doesnt mean get rich quick, this means keeping the money you earn and building it for your future. The tool is good, it helps you set goals, reduce expenses by exposing your outgoings vs income, forecasting tools for growth on investments. Setting goals is key to getting what you want. Once you set a goal with FiVibe wealth creation tools you have to add tasks that will get you to your goal.

    I have just reached some more important goals this month. My passion is to wake people up to take responsibility and recognise where to say no to certain expenses. To educate the avarage man so he isnt totally reliant on the state or a debt slave to the banking industries.

  • Greg says:

    How do you (any of you) handle emergencies when attempting to put all available money toward paying off credit?

    This month, heavy snow and ice came about 4 weeks earlier than expected, so I had to buy winter tires without being able to save for them completely. It went straight on the credit card because I couldn’t not get them and still be safe getting back and forth to work (and not going to work wasn’t an option, obviously). Last winter we had a serious heating oil spill that put us in hotels for 2 months, and we had to cover that until insurance paid us back…of course this went on the credit card too.

    It’s not that I *want* to use the credit card…it’s that all too often things come up unexpectedly while trying to pay off all debts and there isn’t much option.

    • Roberto says:

      Hello, Greg. It is imperative that you build up as much as you can of an “emergency fund.” The fact that a rainy day will come is as certain as an actual rainy day. So, if it is possible to save $100 per paycheck, you’d have about $1,000 in the bank after 5 months…if you get paid twice a month. Imagine that grand as a nice sleeping pill because it will let you rest in peace knowing that if your tires blow out or your transmission does, you won’t have to run to a credit card.

      Of course, this means that you should not put “all available money” toward you debt. The inconvenient truth about debt is that it will wait for you. However, a lot of times emergencies won’t — which is what makes them emergencies.

      Ironically, what you’ll find is that, with some money parked in the bank just gathering dust (don’t worry about making more money with it), you won’t get as many emergencies cropping up. Life is just funny that way. Like when rich people get a lot of free stuff even though they have no problem paying, but overdraft fees keep taking more of what broke people don’t have!

    • Will says:

      Basically, you are living too close to the edge. You Must cut spending drastically enough that when an emergency pops up, that you have enough to cover it in cash. If you can’t do that now, you Will end up in bankruptcy court.

  • Rafelo McMillan says:

    Hello readers,

    While all opinions are valid, we have to understand one thing and keep it in check: the only true God is called Money. No matter who we are, what we do, where we come from and what our reality may be, at the end of the day, we all need money and the main purpose of it is to spend it.

    Nonetheless, it’s a matter of discipline and judgment when it comes to spending it. I used to spend a lot on others and on things I didn’t really need, and thought that because I make good money that didn’t really matter. Then one day, on June 21st, 2006, while on a business trip to Panama, when I was having a few drinks at the bar at the hotel I was staying at, I realized that all I did was just that: spend lots on things I didn’t really need. Clothes, shoes, going out, always surrounded by an entourage in every country and city I went to. Most of the times we end up spending money when we’re in the company of others and if you make more money than the rest, then you don’t see these things.

    In 21 days that I spent in Panama during that business trip, my expenditure was USD 26,000 and change. This means I spent over USD 1,000 per day. Crazy, isn’t it? Specially when I didn’t really buy anything tangible with it. I’ve never been keen on keeping up apperances to make myself be liked by others, but somehow I was a very popular guy with my business associates and other folks in my environ. But when I returned home I changed my approach to money and devised a whole new plan around it and to this date, it has worked fine and I now spend about 25% in a whole year, of what I used to spend in 10 days.

    We still go on vacations, we still shop for new clothes and shoes and we shop for new gadgets since my business is closely linked with technology, but all is kept in check.

    Tips to consider:
    – Track your spending, write down everythin you pay for during the day. You can do that online as there are many tools and software to help you keep track of it.
    – You can keep your credit cards, it’s not a good idea to get rid off of them, specially if you run a business and need to travel.
    – Credit cards (sic) offer great advantages in the form of discounts, exclusive offers, cashback and access to lounges and otehr ammeninities when on the road. From hotel rooms to car rental to spas to dining out. Most cards will offer up to 30% discount if you flash it, and in some instances they’ll offer you up to 50% discount on your tab if you pay with the card itself. This is the case for me when I’m traveling to Latin America.
    – Get yourself a couple of prepaid debit cards and load them up before you go on the road. Keep your credit cards in your wallet and leave them behind when traveling, unless you’re to take advantage of specific offers with your credit cards. Some prepaid debit/credit cards offer same discounts and cashback as major credit cards, so at the end of the day you use the cards for free as you recoup the small fees you pay to upload the cards before you set out on the road. Check out the major card companies websites for such cards, specially the Visa and Mastercards sites.
    – It pays to shop online. Some will tell you it’s not a good idea to buy clothes or apparels online because you must feel the fabric and try to see if it fits or not. That’s just marketing, they want you to go out and spend more.
    – Always wait for offers via e-maill or end of season’s sales. That Kenneth Cole pair of shoes that you see at the start of summer going for USD 350, if you wait for 3 months you’ll find it on sale for $120. It’s a fact. Same for computers, gadgets, phones, etc.
    – Always keep separate bank accounts for everything. For instance, my wife and I (and no, I don’t call my wife to ask for permission, LOL), we have the following bank account system in place:

    1) My bank account: where I keep my money
    2) Her bank account: where she keeps her money
    3) Our bank account: where we drop money from both our accounts for common things to be paid for
    4) Kids’ account: where we dropped money for the kids’ needs, allowances and whatnots
    5) Safe Net account: where we save money for our retirement. Even if you have a 401-k and other forms of retirement accounts, always set your own because the financiall system is too flawed and you might be left out in the open

    – Always pay your bills on time. Direct debit/bill pay is always a good way to do it. But always check your invoices, bills, etc. that you have set up under bill pay for any discrepancies with your bill.
    – It’s always cheaper and more fun to stay home and cook meals, watch tv, cable, etc. with the kids or alone. Get everyone involved in the process of cooking meals and always have lots of games and good, varied music at home.

    – Don’t fall for the trap your friends or so family will try to impose on you, that because you make a good living you need to constantly spend on them or that you should feel guilty that others don’t make as much as you do. I used to feel like that, not anympre.
    – I cut off the people who made me spend thousands monthly, mainly on going out, entertainment, clothes, etc. You can do it too.

    I don’t personally like jewellery, flashy stuff, paintings on my wall, expensive cars or toys, etc.. Hence, I’ve never been frugal, and I’m a very successful entrepreneur, and can probably afford to buy many of the things most folks can’t afford. I don’t really like much stuff in my way, so I enjoy big, wide, empty spaces. A big comfy sofa, a large flat TV and my home office with my toys just about cut it for me. I’m not sure how it works for the rest of you folks, but for me this is about enough. I’m much a jeans, Ts, caps/beanies/hats, sneakers and the occasional sports jacket with sleepers and jeans kind-of-guy. The world if already too crowded, polluted and too noisy to have much more stuff than we really need to.

    Have a great day all!

    Rafe McMillan

  • DR says:

    No the economy wouldn’t collapse if we stopped spending money we don’t have. For one it wouldn’t likely be all at once and then the money would be in savings and investment which then would get into the economy in different ways. I think there would be an adjustment period.

    In addition I hope people learned that you don’t use debt as a “tool.” You don’t use your house as an ATM either.

    Finally I would say using credit cards before you have the money is spending it before you have it technically. I think that point can be made although I tend to agree that if you pay them off then keep them if not cut them up. I tend to want to cut them up when I listen to Dave Ramsey though as he makes a good case with all the immorality in the CC industry.

    • dale says:

      DR, what you call an “adjustment” would be a deep depression with more job losses and foreclosures as a result. I do not like money based on debt, an economy based on debt peonage and the rule of the 1%; nor do I like an economy run on fossil fuels.

      But that is what we got! If people stop spending, I am out of a job and would lose my home. So would tens of millions. We need a different kind of economy, based on rational principles….but we cannot simply stop borrowing or the economy that we have would collapse. Calling it an adjustment does not nearly describe the pain of falling profits, failing businesses, job and home losses. We need a new system. I recommend socialist libertarianism: look it up. It is the original ant-state, anti-corporate, anti-bank/debt libertarianism, before the the corporate right wing hijacked the movement and became a mask for pro-corporate power. As Jefferson said, to save the nation we must “crush….the moneyed aristocracy.” Get your pitchforks but don’t take them to the White House; take them to Wall St, which runs the White House and owns Congress.

      • dex says:

        I laugh at your dramatic exaggerations. Any effects to the economy would be temporary and beneficial in the long run. An economy based on physical wealth, as opposed to debt, is much more solid and prosperous. You fail to realize the economic turmoil and crises that occur as a result of debt and overleverage. Fact of the matter is, Americans (and the world for that matter) must take their medicine on this one. It will not be easy but it is necessary. Fake prosperity based on debt is not and will never be the answer. When people are able to lose their job/take a pay cut/go from FT to part time work without signicantly decreasing expenses (ie just continuing with their previous spending habits by paying on credit) then there is a pretty big problem.

        • dale says:

          I laugh at your naivete. If people cannot use their credit cards, my business will lose much business and I will lose my job. At 71, it’s hard to find a replacement as millions of others would be losing theirs at the same time.
          I pay only bills and necessities.

          You are lacking in insight and compassion

          The US is a consumer based economy; when spending is cut,businesses fail and jobs are lost. This has a ripple effect thruout the economy. It would not be temporary….it would also take down (further) the global economy. This is not exaggeration: it’s simple logic: less spending = depression, social unrest, massive suffering.

          I do not (so stop lecturing) like capitalism, which today is based on finance and debt, but that is the system until we change it. If you look at the PIIGS in Europe, all cut spending (austerity) as policy to save the banks and it led to deep recession and massive protest in the streets.

          Until we revolt and create a rational system based on the needs of the 99%, I will pray that people continue to buy our products (credit cards or not) so that I have a job and am not thrown out of the home I built 20 years ago. I suspect you are a Ron Paul fantasist (“The correction (ie depression) will be necessary….and then gas will be 10cents a gallon and you can get medical treatment by trading chickens.”) unaware that when the anti-war Paul voted to invade Afghanistan (a war crime), he also voted to borrow the trillion dollars that war has cost.

          You claim of dramatic exaggeration is dramatically exaggerated. Job loss is a result of loss of spending. For now, spending depends on credit. Fact…so let’s change it; get your pitchfork and take it down to
          Wall St, which owns government. Let the workers own and control industry…and there will be no offshoring of jobs, health and safety cut backs, etc. PS: only with worker owned enterprise will there be free markets, as capitalists do all they can to destroy free markets, from price wars to real wars, to buying up competition.

          • Chris says:

            Dale, you admitted you are going to lose you home anyway. Clearly the consumer economy isn’t working. Propping it up is pure folly. People are in debt because they are trying to maintain a lifestyle they can no longer afford. Our government and business continue – cruelly – to push this as the answer. We can’t run an economy that consumes but doesn’t produce forever. (Too much of the production now overseas – both manufacturing and service jobs). China would take a hard hit if we stopped spending. Would the U.S.? Sure. But we are going to go off a cliff sometime anyway. We are trillions of dollars in debt. The meltdown/bailout is more like Final Destination scenario. You can keep trying to live for another day, but it’s coming and it’s going to be brutal. No way for us to pay off the debt. Consider how the Chinese treat their own citizens. They will certainly show us no mercy when they come to collect either. The Europeans are right to stop the b.s. that spending is the way to wealth. Spending defers the consequences of living beyond our means. We need to be adults and face the music. Why don’t you just walk away from your house now? If you can’t get the credit for a new one — walk away and save your money to buy one or rent outright. Seems crazy to spend your money and continue working for something you know you are going to lose anyway.

  • Kevin Clarke says:

    Yes these are good tips. If they don’t all work for you, start with the ones that do. Take action and start looking at ways to make your money work for you.

  • dale says:

    If we were all frugal, the economy would totally collapse. Against Adam Smith’s if we all act in self-interest the greater good is achieved, I suggest: if we all refrain from debt and live simply, we will all suffer from a collapsed economy.

    Under the present system.
    We need a new system in which rational behavior does lead to good results.

  • dale says:

    I have not used a credit card in years; I have zero debt except for my mortgage. I have saved 40K in the past 2 years. I will never be out of debt.

    I am 71 and 5 years ago got a refi to improve my property so that when I sold it, 5 yrs hence, I could take the equity gained over 40 years of home ownership and buy a cheaper house that I totally owned to retire in.

    The financial meltdown destsroyed that plan. Now I have zero equity! I cannot sell my house and buy a cheaper…and in 5 years, my mortgage will explode to an unaffordable full amortization of 360K in 20 years. I will have to give it up.

    There is no way I can pay down 360K, tho at 71, I have gone back to work full time to afford my house (which I built in 1991) now, with interest only payments.

    So all this helpful advice is of no use at all to me. I have tried to get a loan to buy a cheapie (77K) with 30K down and then rent out. NO! The rules now state you must have your debt/income ratio determined not by actual option of interest only mortgage on my original home but by the highest payment. This knocks me out of qualifying, tho I am able to save 2K a month. So how about counting the rental income (which would be about 500 cash flow)? NO! You need 1-2 years of current rental documentation.

    Now most cheap homes have been foreclosed so the owners have been evicted and they are empty. Therefore, the potential rental (there is no problem renting in this area) cannot be counted. So, even with 40% down, I cannot qualify. If I could, I could pay off the investment property in 2 years and be able to sell, rent, or move in myself.

    I got a 360K loan with no documentation 5 yrs ago; today I cannot get a loan for 40K tho I have 2K a month surplus income. We have gone from no rules (leading to the meltdown) to rules so severe that few that need a loan can qualify.(blocking recovery of housing market).

    Therefore, I (and millions like me) are screwed, while the banks that we bailed out are making huge profits again. What’s next? Where an I afford to live?
    Costa Rica?

    • Fitty Stim says:

      It’s too bad you didn’t sell your house when you were 65. Then you’d be a multi-millionaire lying on a beach, sipping umbrella drinks in Costa Rica.

      Of course, someone else would now be in your shoes.

      I hope you don’t vote Republican…

      • dale says:

        Well, duh. I made the mistake of listening to the economists (like Greenspan and Bernanke) who said the economy was sound. I was prepared for a 20% drop (the historical limit) but not the 35-70% drop I have seen in our
        affluent area. I spent 45 years building up equity, borrowed only to make improvements, and then the bottom fell out and I have lost about 300K in equity. Yes, too bad I was unable to predict the future. Well, gotta go to work.

        • Dexter says:

          No offense, but if you listened to most economists they would have suggested you be diversified, aka not all of your wealth in a single investment (your house). Stocks have historically outperformed the housing market (which tends to simply keep pace with inflation) as well as pretty much every other investment vehicle. Stocks are now slightly higher than before the market crashed, which is much better than what can be said about real estate values.

    • Will says:

      Costa Rica is nice but is becoming more expensive.
      The same with the Philippines. I rent an apartment out in farm country for cheap and hope I can hang on till my ticker gives up.

  • Etienne says:

    I believe that going to free event is also a great way to have fun, and the best of it, well they don’t cost a thing. We just came back from a music festival in downtown Sao Paulo, a free event, the kids loved it, we danced, sang and had a great time! Look up for the events in your hometown and you will be surprised at the fun you can have without spending money!

  • Marc says:

    Never say never. I have lived a more frugal life than anyone else I have ever met with an income equivalent or higher than my own. Yet I am drowning in debt. I made one mistake: I married a woman when I was half-way through college. She seemed normal. I loved her and never demanded anything from her. But she started using drugs after our children were born. I tried to get her help, marriage counseling, etc. but nothing worked.

    She started to openly have relationships with other men. I held out against pursuing divorce for religious reasons, but I needed to provide a stable home for my young children. In the US divorce isn’t cheap when your estranged spouse is contesting custody and fighting for child support. I had virtually no debt before the divorce, but I had to buy a second vehicle (my ex didn’t work but convinced the judge she needed the family car). Add child care to my mortgage payment and I soon found myself struggling to pay for the thousands in attorney fees. I was awarded primary conservatorship but since my ex didn’t work and I was making over $50k/yr the judge decided she didn’t have to pay child support.

    Three years later and I was making good progress at paying down my debt, but then my ex began dating a convicted sex offender who had been arrested in the past for possession of child porn and possession of methamphetamine. When I found out that the sex offender had attended a family gathering with my ex and my kids, I notified child protective services, but while they encouraged me to keep my kids away from the mother while she was dating this man, they were powerless to do anything. I kept my kids away for a few of her scheduled visits, but after a few calls from the police I knew I had no other option but to hire an attorney again to get a restraining order and set up supervised visitations for my kid’s mother.

    During the case my ex was ordered to be tested monthly for drugs, and the tests were initially positive. She later tested positive again near the end of our case which lasted 10 months. Prior to our case she had threatened to take my kids where I would never see them again. As the legal case began my daughter, who has severe ADHD, started to have serious behavior and emotional problems. She was eventually committed twice for several days at a psychiatric hospital and spent several weeks in two outpatient programs for children. Without divulging too much info, children don’t get committed unless they are a danger to others or to themselves.

    My insurance only covers 10 days for inpatient mental health, and 30 days for outpatient mental health. My daughter required much more than these arbitrary limits, so I have about $10k in denied health insurance claims, and continuing out-of-pocket expenses for therapy and medication. This is nothing compared to the tens of thousands I had to borrow to pay my attorneys. I’ve had to sell my house at a loss and move in with my brother’s family, but a few months ago I had to live in a hotel for 6 weeks due to water damage in my brother’s home. Blackwater overflowed from an upstairs commode and seeped into upstairs carpet and destroyed the ceiling below. Insurance is covering my brother’s repairs, but they delayed work for several weeks. They hired one company to spray disinfectant and another company to remove carpet and drywall, but the second company stalled and wouldn’t do work until appraisals were completed, papers were signed, and checks were issued, which my insurance company delayed for weeks, and this was the insurance company’s contractors!

    Now I am back in my brothers house, but the insurance company is refusing to pay for my hotel and meals during this time because the home was “not uninhabitable” even though their own contractors told me the home wasn’t safe for the kids to live in until the carpet was removed and disinfectant was applied. I had to borrow from my 401k to pay the hotel bills, and now with automatic deductions from my paycheck to repay the 401k loan I can’t pay all of my creditors and my company won’t allow me to just default on the 401k loan. I’d work two or three more jobs if I could and if it would make a difference, but I’m a single dad stuck in my ex-wife’s town by court-order.

    I have no family in town, as my brother has taken a job assignment in another state. Whatever I could bring in after business hours or weekends would not cover the cost of a babysitter, and I already miss enough work from my day job to take care of school meetings, doctor appointments, therapist visits, etc. My after work hours are consumed with preparing meals, cleaning a home, helping kids with homework, mowing the lawn, etc. So who would be doing this while I was out working second or third jobs? I already have to take work home most weeks and travel occasionally, so I think that any “second job” would not be a practical solution.

    I haven’t had even basic cable TV in my home in over four years, I don’t buy DVDs or CDs, my kids don’t even qualify for the discounted YMCA membership the welfare kids can get because my income is too high. I am probably going to have to take the walk of shame into bankruptcy court, destroy my chances for a better paying management job (I hear they don’t look so kindly to bankrupt job applicants these days), and since my income is higher than median I don’t get the Ch. 7 clean slate that I could have had before 2005. So I’ll be stuck continuing a life in misery for at least five more years sending every dollar of my “disposable” income to pay for all the crap I never wanted to buy. A scary prospect considering that only 36% of ch. 13 bankruptcy plans ever end successfully.

    I’m so glad that people can pat themselves on the back for having financial discipline, but it only takes one major medical event, one denied insurance claim, one frivolous lawsuit, or one dependent with special needs to set all of your plans ablaze. Good luck with your money, but remember that some of us worked just as hard as you, planned just as thoroughly as you, bought the same insurance, got the same education, paid bills on time, lived as frugally as you, but circumstances just got the better of us.

    • Fitty Stim says:


      I don’t mean to be intentionally mean or cruel…but you really need to learn a few ground rules about posting comments.

      Your comment is way too long and few people (if any) will read it. According to MSWord, your comment has 6175 characters (9 paragraphs and 75 sentences on an A4 paper).

      Clearly you have something to say. But in order to get your message across, you should really try to summarize your thoughts or try to limit the number of topics to which you refer.

      I hope I’m not being too much of a [fill in word of choice]

      • dale says:

        I tend to read longer posts as the short ones usually are off the cuff and have little thought behind them. I don’t think we need to lecture others on how many words they should use to convey their ideas. Some people write in sound-bites; some write in essays. Essays convey more thought and substance…so length never bothers me, so long as it is not just word mass, without paragraphs to organize the ideas.

      • danel says:

        Hi Marc,

        It seems that when it rains it pours in your situation. I felt your pain and frustration. I was in your predicament not too long ago but I persevere and with the help of my mother and friends, things ease to normal little by little. With your determination, you’ll come out more stronger and wiser. Don’t give up.

    • Shawna Willcox says:

      Marc – wow. I am so sorry. You are exactly right, circumstances can absolutely take your feet right out from under you.

      I suspect this might get deleted, but am going to post it anyway. Please, please look into Dave Ramsey. Find his radio show on a station near you and start listening (it’s free!). I have heard stories that were as heartbreaking as yours on the show, and he is able to put some clarity to it and help them focus on what is important. In your case, I think he would say food, shelter and necessities (like clothes that fit) for you and your kids. He might even recommend bankruptcy, but that is always a last resort.

      I realize that it has been months since you posted this. I hope that everything is ticking upwards for you and your kids by now and if you are still struggling, I hope you will find help and hope soon.


    • Will says:

      A bankruptcy due to medical expenses is the least egregious kind of bankruptcy to your credit rating because even bankers understand how outrageously medical professionals and institutions overcharge for their services, and how unexpectedly the bills pile up. I am very sorry for your difficult times.

  • Bill says:

    I guess a credit card to some people is like a beer to an alcoholic. If that’s the case then you need to get rid of it. Let me tell you how credit works: 8 years ago, we went to our local bank to get a loan for a house. Up to that point, we used our bank issued credit cards for gasoline or when we were on vacation. We ALWAYS paid off the card EVERY month. We never spent more than we could pay. We had no other credit to our names and were in our 40’s when we applied for our loan. We even paid cash for our cars when we bought them. The bank jumped all over themselves when we showed up and couldn’t do enough to give us a 10 year loan and at a very good rate I might add and they even gave us an application to upgrade our credit cards to gold. Now, you may ask, how did he get a loan with no credit?. Well, we got it the old fashioned way; namely, we saved our money and paid our monthly bills (rent, electric, water, heat, phone etc.) on time every month. Month after month and year after year. You don’t need to go into debt to get a loan to go further into debt. All you need are good spending and saving habits and the ability to show that you can and do pay your bills in a responsible manner. The credit industry is a scam people. Designed specifically to squeeze every penny they can out of any idiot willing to sign up for it. They’ve got you believing that you have to have everything right now and that if you can’t afford it then something is fundamentally wrong with you. You really don’t need it if you can’t pay for it and if your circle “demands” that you go into debt to prove yourself, well, then it’s time to find some new friends.

    • Ron says:

      I am really encouraged by your story. I notice that people don’t want to look at themselves in the mirror and admit that they need some cleaning up, financially. We let others control our lives by making ourselves feel inferior, just because we don’t have what ‘our friends’ have………and ultimately, being in debt is the sum of all our impulsive choices.

  • Jean says:

    One method that works for me is to create an ‘imaginary’ debt in my mind. It’s not really there but I pretend it’s the next inevitable step if I start to exceed my budget for a given period. Sure, ultimately, it’s all about discipline and effective planning but creating an imaginary fear or reverence has always worked for me too in matters of temperance.


  • Jeremiah says:

    This is exactly what the title says it is about. I’m glad that we have found the road of staying out of debt, we did just as you described here. Great article, definitely going to tweet this one!

  • Angela says:

    Hi, I agree with cutting up the credit card. It may seem like a lot of hard work to pay off all you owe but it is so worth the feeling of freedom once the debt is cleared. I have gone from being hooked on credit card spending to now having a debit card and always making sure I have money in the account. Having a weekly or monthly budget is also a great asset. I have found using cash for purchases to be another good tip. It is helping me build up strong money managing habits and is getting me on the right track to creating wealth. I have swapped my habits from spending to saving, and it has removed a lot of stress from my life. Thanks for the great article!

  • Sherry Vosburgh says:

    The whole of the Western world is in debt – burning the candle at both ends.
    The next generation will have to pay… and the environment.

  • Sherry Vosburgh says:

    “Decaying” your bank balance?? Is this American? Never heard it in Europe.

    I find a pre-paid debit card from the belgian post-office is safer. Not only can I not spend what I don’t have, but a thief can’t either.

    Your articles are very helpful as I’m paying back a friend who paid my bank loans. In Belgium one also has the option of getting a Financial Administrator (usually a lawyer) appointed by a magistrate. The lawyer gives me a weekly allowance on a debit card & pays my bills. He is an authority figure and can help in tricky situations. I pay him 3% of my pension. It’s worth it for the peace of mind. (“Administrateur provisoire de biens” appointed by the “Juge de Paix”.)

    • Barry says:

      I would rather not use a Financial Administrator and have the 3 % for myself. Why pay someone else or use credit and pay interest, when you can be using that money for buying things that you need instead of giving the money to someone else. For 33 years of married life we have never been in debt. We save and buy when we have the money. I have a Visa debit card and an American Express credit card. Both work like cash in hand. The debit card spends only what you already have. The American Express card is paid off automatically monthly so there are no interest fees.

  • aryton senna says:

    I paid off my last debt – a residential real estate mortgage – in 1991.

    ret expat

  • Roberto says:

    I don’t know if could have started and maintained my music business if I would have been still strapped with debt. Yes it was hard especially with school loans and all manner of other debts. I was even stuck at one time in a rut with the check cashing places!

    It was a long and at times painful process, but now both personally and business-wise, I am completely out of debt (except for the mortgage). And now some of the money I used to pay to my creditors is going towards paying off my house early. I’d like to actually enjoy my paid off home while I’m still young after all.

    Living within my paychecks is actually quite comforting. Looking at my bank account and actually being surprised when I realize that I got paid rather than checking every five seconds to see if I haven’t overdrafted yet is like waking up from a scary nightmare!

    • Dexter says:

      Hey Roberto. If you don’t mind, what kind of music business is it that you run? I am a young entrepreneur, thinking about starting a business. I have always been interested in music, and any advice would be much appreciated! Due to my age (I’m 20) and limited capital, just looking for a little guidance.

      • Roberto says:

        Hello there, Dexter. I sing and play for weddings, funerals, and regularly for about three churches. The best advice I can give you is to have a backup plan at all times. Actually, music has always been in the background as a hobby, but then one day, I started asking for money and people appeased! It was like Christmas season all year round.

        Eventually, I managed to get good enough to ask some of the churches to pay me a salary and I was able to quit my day job at the hospital. But even then, working just for a boss wasn’t enough and as you can imagine, musicians don’t make enough money. That is, if you don’t diversify and you don’t use your imagination.

        I am a strong believer that the more people you can help, the richer you get — both psychologically and financially. So, eventually, I thought to myself, “When people get close to death, they usually think of funeral arrangements, right?” And then I hit the jackpot! I started selling my services to local funeral homes, and then, simply, the word got out. Funeral homes started booking me, people whose parents or spouses were passing would look me up, and eventually, people started booking me for weddings. Then came wedding parties, then house parties, then restaurants.

        The thing about music is that if you’re willing to keep learning and willing to keep trying to make as many people happy as possible, then the sky is the limit. Now, I have another hobby of teaching other musicians how to be good studio musicians. I’m “afraid” that this is becoming another whole I need to fill because people know my musical reputation and now want to pay me to record them!

        So, in summary: be an expert at your craft, help out as many people as you can (for a fee), and keep learning after you’ve “arrived” to guarantee a long shelf life for your business.

  • Financial Advice for Young Professionals says:

    I see how people fall into debt. But once you’re stuck and you see what bad decisions you made to lead to your situation, you should be working your ass off to get out of it. I like the steps you’ve outlined above, I wish more people would do it before they get into debt though. That’s probably asking too much out of people as a whole though.

  • The Frugallery says:

    Another trap people fall into begins when you get late fees or over spending limit charges. Even if you think you have your spending under control, these fees can put you off track. Pretty soon you are paying interest on finance charges, and then more interest…. and then more interest. It’s a hard cycle to get out of!

    • Will says:

      Well Frugallery, if a person is anywhere near an over-limit charge, they are already living beyond their means. Does it stink to live like you’re poor? Of course, but the longer you live like you are poor, the less likely you’ll BE poor.

  • Kim says:

    I call my husband before I buy something. It took me a long time to get out of debt and the spending cycle but I have to agree with you that it is so much nicer not owing anyone money like that. I think that the culture that has been created in America tells us we must spend and we have to get out of that cycle. After workjing in a shop for 9 months, I saw other people’s spending habits which made it very real to me. So now I hardly ever shop and try to fix things before buying new. I am happier than other people who have more stuff than I do. Unfortuantely people get irrate when you tell them that we all shop too much, I think its because they know it is true. I just remind myself that I have no place to put it and I have enough stuff already.

    • Sheula says:

      You call your husband? Ahahahaha

      • Paul says:

        Yup, and I phone my wife. And she phones me. Helps to keep a lid on it.

        • André says:

          Just discovered this site.

          In my case, nothing over $20 gets purchased right away. I wait a day or two to see if I really want it. Ditto for anything over $50 but, in that case, I talk it over with my wife to see if I can convince her that it is a good idea for me to buy … whatever it is that I want.

          Most of the time, I say “Bah! I do not need it” the following day. No impulse shopping. So far, it has worked great. The only debt I have is a mortgage which is getting smaller and smaller and smaller.

          Also, I have a weekly allowance and put some of the money aside, so that I can buy myself a nice toy when I really, really want it (laptop, game, etc). Nothing goes on the credit card, except if we have the money already put aside for such purchase and we can also get extra warranty on the purchase.

      • Will says:

        You might get one when you grow up.

  • Sherry Vosburgh says:

    Pre-paid debit cards are better & safer too.

    • Will says:

      That would work, Sherry. I wonder if that plan has any benefit over the old tried and true method of just spending cash. I’m old, I like cash. Write a check for larger purchases like autos and such. I use my debit card primarily for internet purchases and it is attached to my checking acct.

  • Drew says:

    It can be difficult to stay the course and pay off all your debt before moving forward. It’s a bit like a diet in that respect, it needs extraordinary willpower. I think it’s better to start saving simultaneously, although the ratio of debt payments to savings is up for debate…in fact I’ve just been talking about this today…

  • Modest Money says:

    I don’t agree with avoiding credit cards. That is just admitting you are not in control of your spending. Used responsibly the credit card companies will pay you in cash back rebates or other rewards. You just have to develop the willpower to only charge what you can afford to pay off in full each month.

    • Sienna says:

      I agree, it takes willpower and maybe a brand new perspective on the value of having good credit. I love credit but doesn’t mean I have to use it. The credit makes my credit score better. I don’t strive for a good score so I can go out and buy more. I do it for the pride I feel whenever my score inches up a little, or a lot. Too many people only worry about their credit when they want to get something, or when they’re in deep debt poo poo.
      Viewing savings accounts differently also helps. A lot of people get them, then put money away and end up using the money later on. Even if they have all intention of saving for the long haul, they dip into savings. A better way to view money in the savings account is to just forget it once it’s in there. If you save, put a reason for saving. Retirement, a new car, a neon pink retro sweater. What have you. Then sock the money away and pretend it’s already gone and spent. This works for people who have a tendency to dip into their savings – others may not need to go to this extreme. I used to dip, a lot. I started doing a lot of the tips in the article, like the envelope budgeting and penny counting. Without relying on the savings account and forgetting its balance, the physical money was just never there to spend.

    • Financial Advice for Young Professionals says:

      Well said. Aren’t we all adults here? There is no need to treat someone like a child. Everyone should be responsible enough to know how much they have in their savings accounts and they shouldn’t spend more than that on their credit card. Simple math if you ask me.

      • Will says:

        Surely You jest. Credit cards are unavailable to the 17 and under crowd. Americans spend about 20% more than they earn. Not very adult. I’m constantly baffled by my friends and co-workers inability to comprehend my “if You can’t write a check for that car You can’t afford it” line. Almost everyone I know borrows money to buy a vehicle. Borrowed money allows them to drive a far finer and more expensive auto than their income merits. “But hey, I needed this 4-wheel drive suv to pull my boat (also borrowed money) in and out of the areas I like to fish”.

        “All adults here” my eye. A society in denial of it’s situation, trying to live like well paid 1965 Americans while not admitting we make peanuts.

        • dale says:

          The reason that Americans have gone into debt is to maintain their standard of living. To live within their means, they would have to lower their standards. The reason for this is that since Reagan, the median wage has declined by over 30% (BLS)…so the only way Americans could keep from falling into a lifestyle of poverty (broken down car, tumbledown house) was with 3 measures:
          1) work longer hours, shorter vacations…Americans work about 20% more than Europeans
          2)more family members go to work (mom used to raise the kids; now she has to work)
          3) borrow.

          The alternative, in the face of declining wages (despite an 85% increase in labor productivity in the past 30 years), is to lower the standard of living, not send the kids to college, etc.

          If the working class wages had risen at the same level as the 1% (whose income has tripled in the past 30 yrs as the median wage declined by 1/3), the average household today (which has more than one worker) would be about $150,000 a year. If that were the case, the economy would be booming like never before. Instead, the middle class has been hollowed out and 6 Walmart heirs (who “built” nothing but inherited wealth, based on corporate welfare…average Walmart employee earns so little he qualifies for welfare, at taxpayer expense) have more wealth (which they did not work for) than 100 million Americans, mostly poor workers.

          It’s time to stop whipping the victims of a system of funneling all new wealth to the rich (most of it created in fact by the taxpayer funded innovations of the internet, gps, satellite technology, and NASA miniaturization technology) while reducing the income of the ever more productive working class. This form of economic class warfare has created the current situation of extreme inequality.

          When inequality is extreme, there are two certain results:
          1) economic collapse (from a demand gap by the tapped out middle class)
          2) social unrest, as those hurting the most rise up against the “moneyed aristocracy” which Jefferson warned us 200 years ago would, if unchecked, destroy our nation and its laws.

          Rather than blame 150 million American Workers, who work harder and longer hours than any other advanced workforce, it would make sense to blame the system which screwed them and continues to do so.

          Walmart, the largest employer in the country, has created a huge class of welfare dependent low pay workers (average non-executive wage is $8.80 a hr, meaning you probably qualify for foodstamps, medicaid, etc, all of which Walmart tells you at its new employee orientations. This is corporate welfare, permitting Walmart to make immense profits for its idle owners at the expense of the the American taxpayer.

          It is the corrupt system of engineered inequality to blame, not the hard-working American workforce.

          • Joe says:

            Wal-Mart is accountable to its customers, its employees, and its shareholders.
            They pay employees what the market will bear. Employees get opportunities to move up and own stock.
            Customers benefit from low prices.
            Shareholders who invested in Wal-Mart back in the 70’s through the 90’s are rich. There are plenty of other stores that charge a lot more and pay their employees more, so you should shop there.

          • Will says:

            I agree with your analysis mostly. Certainly in regard to the timeframe (1980’s) it became public policy. But to say that individuals shouldn’t have the responsibility to monitor their own finances blows your credibility. If you are poor, live like it. If your wife leaves you and takes all you’ve earned and your children, write your congressman. The longer you live like you are poor, the less likely you will be. Don’t fool yourself into thinking that you can borrow and spend your equity in a home you can’t afford to permanently live beyond your means. It doesn’t work for long before it ends in tears. We are poor because we failed to see the two arms of the same monster that have continued to flood our labor market for 35 years.

    • Zvi says:

      Modest Money, truth is if you’re in debt that’s out of control, then you have to cut up that card! If you are in control of your finances, then have your card as you please, good on ya.

      The point of getting rid of the card is that you have lost control and you must apply stringent measures. If you haven’t been disciplined, you will have to be treated like a child becasue you’ve been childish in your ways financially.

      The truth is, credit can be a friend, but can also be the devil if not handled maturely. Judging by the number of people who are in crazy debt today, we clearly have a world of immature people, or should I say kids? Well done on the rest of you who can control your debt. For the majority of consumers though, cut up that card!!! It will save your life.

    • Addict says:

      Modest Money,
      Developing will power is great, but not getting rid of your credit cards is like telling an alcoholic to not throw his alcohol out. Instead, he needs suck it up and develop willpower to drink only what he should. If you can’t handle something in your life, get rid of it. It’s that simple. People think we should focus on our weaknesses and try to make them better. It’s like telling a blind person to try harder to see. That will work, yeah!

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