Monday, January 3, 2011

Day 81 - Step 2: Take Responsibility

January 3, 2011

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

Step Two: Take Responsibility

Once you have mastered Step 1 by admitting you have a problem with debt, the next step in changing your thought process is to own up to it and take some responsibility.  Based on my own experience, my parents unknowingly exposed me to financial issues from a very early age.  We lived on credit cards, lived paycheck to paycheck and had utility cutoff notices stuck to our front door on a regular basis.  If there was ever a windfall (and there rarely was) it was always used to play catch-up on late expenses.  My parents couldn't pay for college yet I was still expected to obtain a college degree at a highly ranked school even if it meant taking on significant student loans.  So what did I do?  I went to college, got a credit card, ran up a balance and took out multiple student loans to pay for it.  Once I finished graduate school I leased a brand new car, continued to use credit cards and was on an interest only student loan repayment plan.  I thought I was living the high life.

It took me until about age 30 to realize that carrying $100,000 in debt wasn't exactly smart living.  I realized that despite my accounting degree, I was completely in the dark about basic financial principles.  There were so many people I could blame for my predicament - my parents, the car dealer, my school counselor, the loan officer.  But eventually I learned that regardless of the situation, the only person who can really look out for my best interest - and who is most interested in fixing it - is me.

So what advice do I have for those of you who may be facing a similar situation now or sometime in your future?
1. Don't just take other people's word for it.  Make sure you really understand a situation before jumping into it.  That person approving you for a mortgage loan has an alterior motive aside from "helping" you.  Your parents generally mean well but may not have the knowledge to put you on the right track.
2. Don't waste energy by blaming yourself or others.  Channel that energy towards a solution. Regardless of who is to blame, you should focus on what you will do to change going forward.  Rather than focusing on blame, focus on change.
3. Take responsibility sooner rather than later.  The longer you wait, the more difficult it may become to make financial changes.  More debt, kids, weddings or life may just get in the way.

Read about Step 3: Get Everyone On The Same Page
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