For the most part Credit can be a very strong ally. You must have credit to buy a house, a car, or anything else that requires a loan. So, unless you have a whole mess of cash lying around, you pretty much need credit and a credit history.

The bad thing is, Credit is money that does not belong to you. It is money that will have to be paid. What credit card companies want you to believe is that you are worth the amount of the line of credit they give to you. I can’t say this loud enough…. YOU ARE NOT WORTH ANYTHING BUT WHAT IS ON YOUR PAYCHECK!!!! So why are you going to spend more than you make?

I know, I know. “What about a Mortgage or a Car Loan?” Well, Frankly, You really should not be spending anything you don’t already have. A house is an investment. It retains its value for the most part. But paying a $1600 Mortgage payment when you only make $2000 a month is just not all that smart. We will come back to the mortgage in a later chapter. As for your car, it is an investment, too. The car itself does not retain its value unless you own a Jeep or a Harley (I’m not promoting either of those. Jeeps burn too much Gas and Harleys.. Well, I had a friend die on one a few months ago (April 2005), but reliability is a necessity. You have to ride that fine line. Buying a new car for a crazy amount, or driving the used car you already own and saving what you would be spending on the loan payment (so you will have more in the bank for a down payment, while saving more on interest and paying the new car off faster) while trying to keep the used car in good working order (maintenance, maintenance, maintenance), in other words reliable. Again, more on the car loan later.

OK, Back to the Credit Cards. They are Evil! E-V-I-L!!!! Why? Because they are spring loaded traps. They get you to spend money that you don’t have and make you pay more when you can’t pay them back. See… Pure EVIL!

I say… Cancel all your credit cards except for two. Keep one Mastercard and one Visa, preferably ones that pay you back in one form or another. After you cancel the others (of course you cannot cancel the ones that still have a balance. More on that later), then cut them up and throw them out. From the two you have left, one goes in your wallet and the other goes into a safe place in the house for emergencies.

There are now two ways you can use your two remaining credit cards. The first is to never use them again. This is for those who cannot control themselves when they are out shopping. Those of you who are impulse buyers, you must use cash from now on. And those ATM cards, the first time you overdraw on your check card, I don’t think you will be using it again without thinking.

The second way you can use your card is to pay it off every month. This is for those of you who are more responsible. I like this way because it keeps everything on one bill. But, until you get used to your spending habits, you may find paying the bill off each month will hurt your checkbook a bit. That is ok. If you can struggle by paying the higher bill, you will be less likely to run it up that high again. If you find that you don’t pay if off every month then go back to the first option. Don’t use your credit cards again. (leave them for emergencies, and NO, those black 4-inch heels are not considered an emergency!)

Go back to the How to Eliminate Your Debt Page.

First things first. You must realize that spending money works against your goal of paying off your debt. Spending money will make your situation worse. Now, I know that some things are essential. I suppose you will need a place to live and food to eat. Some of you like to wear clothes for some reason, and others demand having some sort of machine that will get you from place to place. I think you call it a car.

This is all well and good. There are things that need to be paid for. Think about it before you buy it though. Think about weather or not you really need what you are getting ready to spend money on.. There are ways to limit the amount of money you spend on necessities. Buy store brands rather than brand names. Buy chicken rather than steak. Carpool or ride your bike. Buy your clothes from thrift stores. The idea is to use as much money as possible to pay off your credit cards and other debt.

The other thing is that nasty habit of buying things on the fly. This is one of my biggest weaknesses and probably the reason it took me so long to get out of debt. When you go into a store, you probably have a small list of things you need to buy, but when you leave, there are four times the number of items in you cart.

My biggest thing is buying big items when I don’t have the money to pay for them. Like the time I got tired of my little 15 inch monitor. I had been thinking about getting one of those nice flat screen monitors for several months, but it just was not in the budget. Well one day I was at Comp USA and saw a nice monitor. It was exactly what I wanted. Well I knew I didn’t have the money really to cover it, but I went ahead and put it on the credit card anyway. It took me four months to pay that thing off. Sure I got good use out of it, but if I had waited and used the working monitor I already had, I could have saved all the interest I spent on getting it early and used that interest to pay for something else.

What I do now when I have the inkling to buy something spontaneously is ask myself a series of questions.

1. Do I really need this item? Am I really going to use or get enjoyment out of it?
2. Can I pay cash for this today, right now?
3. If I put it on the credit card, will I be able to pay it off at the end of the month so I won’t have to pay interest?

If you can’t say, “YES” to ALL of these questions honestly… Then you should not be buying the item or service. (The only exceptions are necessities like car repair, home repair, etc.)

One More Thing: Credit Cards are the spawn of Satan. I will explain in the next section.

Go back to the How to Eliminate Your Debt Page.

I remember being a teenager who just turned 18 and knew that I needed credit if I was going to be able to do anything in life.  I was going to need to have my own credit to buy a car on my own, and eventually be able to buy a home. The only problem was that to get credit, you had to have credit.  Most credit card companies will not give you credit if you didn’t already have a history of using credit.

So this is what I did:

I went to the bank and asked them for a secured credit card. This card is basically a bank account that holds a set amount ($300 in my case) that you pay them. Then when you charge something on it, if you fail to make a payment, they will take the money that you have set up in the account. If they end up doing that, your credit score will go down and no one will give you credit.

Your objective is to establish credit for yourself and raise your credit score so you will start receiving credit card applications in the mail. To do this you must buy something and let the balance on your secured card roll over for at least a month. I suggest that you buy something that you have wanted that will cost you about $100. The first month pay $25. The second pay another $25. The third pay another $25. Finally on the fourth month pay the remaining balance which will be above $25 because of the interest you have accrued over the last 3 months. By this time you should show yourself in good standing with the credit card companies and they will start sending you pre-approved applications. If this is not the case, buy something else that you need or want and continue to pay it off systematically. Sometimes it can take six months to a year to start receiving the applications.

When you do start receiving applications, make sure you pick one that does not charge an annual fee, and gives you something back for making purchases. For me, I like to get money back, or points towards things that I like to do. I even have a card that earns money towards college.

When you get your first unsecured card, go back to the bank and cancel the secured card. They will give you the balance from the account you set up to secure the card.

Most people only need one credit card.  The cards that you get for department stores usually have a crazy interest rate.  The only time I would sign up for one of those is if I was buying furniture and they offered to defer the interest for more than a year.  If you do that, you need to make sure that you pay the balance before they start to tack on that interest. 

What I would suggest that you do with your new unsecured card is to use it for gas for your car.  Then pay it off every month.  Do not let a balance grow on that card.  If you do, do not let it stay there more than a couple of months. If you are going to use the card as money you don’t have, do not buy the item that you are thinking of putting on the card. This is how people get themselves into trouble with debt. Credit cards should only be an alternative to carrying cash. You should be able to pay off the card at any time. At least that is the way I look at it. 

More and more people in the US of A are having problems with their debt. I know. I was one of them. To tell the truth, I am again and I am working on getting myself and my family out of debt again.

When I was in college, I was working 35 hours per week and taking 12 to 16 credit hours at school. I was living with my parents and I still had very little money. The reason? I spent it all on stupid stuff. I fed all the collections that I started with more and more stuff that I really didn’t need. When I graduated college, I put a $3,000 down payment for a new car on my credit card. That was a really big mistake. It took me almost 5 years to pay off that $3,000 and it cost me so much more than what I originally charged.

A few years ago I was fed up with all the debt that had piled up on me. It was close to $5,000 plus my car loan. Now I am lucky that I started to read up on how to get myself out of debt when I was only lightly in debt. I know there are people out there who are hundreds of thousands of dollars in debt. That is terrifying to me.

In my reading, I found that I should be living below 80% of my total income. For some reason I had not really realized that in order to get myself out of debt, I had to actually be able to pay for it. From that point I started to weed myself off of buying stupid things. Most of my collections got moved to the sidelines. I even started to liquidate my collections. My baseball collection found its way onto eBay, as well as part of my autograph collection and some of my coin collection.

I was given regular raises at my job and my income was slowly growing above what it was costing for me to live. I started to see a change in the balance on my credit cards. Instead of watching my credit card debt slowly grow a little each month, I was starting to pay it off little by little. I soon had all my credit cards paid off and took big chunk out of my car loan.

The following is a Step by Step Guide for how I was able to get myself out of debt.

1. Eliminate your stupid spending.
   • Don’t buy Name brands if you don’t have to
   • Don’t allow yourself to make spontaneous purchases. Always Sleep on it.
   • Don’t use your credit card.
2. Credit is Good, Credit Cards are EVIL
3. How Deep Does Your Debt Pit Go?
   • Gather all of your monthly bills.
   • Find How Much you Owe Per Month
   • Cry a bit
4. What Can You Afford to Pay
   • Find your Pay Stub(s)
   • Subtract your Total Debt per Month from Your Total Income
   • Cry a bit more
5. Types of Debt
   • Good Debt
   • Bad Debt
   • Really Atrocious Debt
6. Quickest Way to Pay off your Debt.
7. Proper Perspective about Money
8. More on Thrifty Living