Sunday, January 2, 2011

Day 80 - Step 1: Admit You Have A Problem

January 2, 2011

I have developed a guide to help you achieve the mindset and principles required to successfully become debt free.  This is the first in a series of posts about my Twelve Steps to Debt Freedom.

Photo by m_bartosch / FreeDigitalPhotos.net
Several readers have sent me emails discussing their desire to become debt free, but the idea sounds so overwhelming to them they don't even know where to start.  My own mother goes into a fit of panic at the thought of paying bills - even if she has plenty of money in the bank.  How do we overcome our fear of finances?  Twelve Steps to Debt Freedom provides a structured process that will help you create not only a plan for paying off your debt but will also ensure you have the right mindset to feel confident enough to succeed.  Remove your fear of the unknown and take control of your financial situation.

Step One: Admit You Have A Problem
To some of you, this first step may sound slightly familiar.  I will admit that my program is very loosely based on other Twelve Step programs for various addictions.  In a sense, exhibiting a pattern of excessive spending habits could be considered an addiction.  Or a lack of knowledge.  Or somebody else's fault.  Regardless of your justification for debt, you must first admit that carrying this debt is a problem in your life - whether the amount you owe is $500 or $500,000.  

Debt results in unnecessary stress, limited freedom of choice and restricted cash flow.  That brand new car may be nice to drive around, but that $600 monthly car payment won't feel so good when you decide you want to make a career change.  You can't change jobs - you need to make your car payment!!  That vacation to Hawaii sure was fun.....until you got the credit card bill that adds 19% interest to your already expensive airfare and hotel costs.  I have experienced both of these scenarios and I assure you I felt nothing but remorse afterwards.

Sadly, the examples I just gave are standard fare for most Americans.  Consumer spending is a significant percentage of the United States Gross Domestic Product.  As a result, messages of "spend, spend, spend" surround us especially during periods of economic downturn.  Remember when we were all encouraged to purchase American cars at zero percent interest in order to do our part to help our country?  On top of this increasing pressure, any attempt to keep up with the Joneses usually results in an excessive spending spree (come on, we've all done it!).

As part of accomplishing Step One, I ask that you take a step back and become more aware of your spending habits.  Do you consistently spend more than you make?  Do you splurge on high dollar purchases or are you slowly throwing your money away five dollars at a time with your latte addiction?  Do you see any problem with consistently purchasing items on credit (if you don't, then I suggest you stop reading now)?  How many credit cards are in your wallet?  How much do you put in your savings account and 401(k) every month?  Do you feel stuck because of your financial situation?  Does spending money fulfill a need for something else you are lacking in life?  Jot down your thoughts - getting in the habit of writing things down is a good habit to start now.

If you are beginning to see some unhealthy spending patterns or negative consequences as a result of the debt you owe - congratulations!!  This is the first step to debt recovery!  You can't fix a problem unless you admit you have one first.  Now, introduce yourself to the group, grab a donut from the back and look forward to graduating to Step Two: Take Responsibility.

Read All About Step Two: Take Responsibility
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