Recipe For Financial Freedom

It’s over a year and a half that I am in a bad debt situation and surprisingly it’s nearly one and a half years that I am into a paid job. If I correlate the two then I can conclude that steady income flow increased my debt taking tendency. In other words I will say that the security of getting my paycheck made me to overspend.

When I gave it a thought so as to find the reason for the above I could come up with only one reason “I can pay it later when I get my paycheck”. If I talk in time frames then I was spending future money into present but the problem with this concept is that you cannot account for future expenses (always) which come as an emergency e.g. bike/car repairs, health problems and many such unforeseen incidents/events.

So what happens next? I have already spent that money in the past and now I am stuck with a high credit card bill with no money to pay for, the result a bad debt and more importantly a way to a debt trap.

The cause: credit card spending! No, the cause here is trying to afford that you can’t just by assuming valid reasons for buying at that moment, but later in debt trap you feel that you could have deferred your purchase. For example, I need a new car, (mental process: the car I am driving is making sound, the mileage is very less and asks for more maintenance so why not replace it, I am getting a good deal with XX dealer). Next day you are with a new car along with a big debt on your head.

Now you are desperate to get out of it but you can’t as you cannot overclock your debt reduction process due to a simple reason, you don’t have any extra source of income and the debt brings interest and other charges with itself which further enhances it.

In this case my mind stopped thinking constructively for alternatives for reducing the debt as it is already preoccupied by the huge debt. The result, time wastage over trivial things and not be able to devise a plan. So what should I do? Well there is a way, which I am following and trying to get out of debt.

1. Get your mind to think straight
One fine day I realized enough is enough, now is the time to think positively and work constructively to reduce debt though it took me eight months to start thinking positively. This was through some finance journals and magazines, reading some finance blogs (I had one but I was not updating it) allocating my time for my work (paid job) and my readings.

2. Controlling behavior once and for all
Controlling behavior implies here as the controlling of my impulse buying behavior changing the basic mentality that by owning things that I cant afford will not make me rich (what I generally presumed) but inherently showed my lack of planning for the future. So a change of mindset or preparing the mind for the future and replacing the old mindset of living in future formed the second stage of my process.

3. Always remember the second point
When it comes to money management you can easily lose your focus, a lapse of decision once and you find yourself again into the same mess, remember you can get into debt in one day but to get out of it will take a year.

4. Set a goal for the future
After practicing the first three points you need to set a financial goal for your future (this is what I have planned for myself and its really working) keep reading/reviewing your goal on a daily basis so that you are motivated to save. Remember I have not put the heading as save money rather, it is “set a goal” so whatever it takes to achieve that goal you have to do it. Now saving money comes as a subpart of achieving your goal the other parts can be spending less, earning more, searching for alternative sources of income, keeping your mind out of frivolous spending (the keyword here is mind and not spending) these subparts has to be followed in parallel and not one at a time. Following this process it is likely that I shall be able to remove my bad debt as fast as I can and this applies to every other person in bad debt.

5. Don’t Fear the Debt
Now you are out of debt, this is not the case with me so this is hypothetical but after a lot of thought I have come up with the best that I can think off. Take debt!! Amazed? Well I say so because now to earn more or to increase your wealth you need to find avenues for getting good debt, and invest that debt and then generate a positive cash flow out of your leveraged position. You have to practice the above stages consistently though.

It’s not as simple as it is written because it is a process and not just steps to improve your financial condition. This month I am trying very hard to reduce my debt; I am waiting for month end to finally clear out a major chunk of my debt. At least this will free my mind to find other resources to generate money and to reduce my debt further. As we say money works to generate money we can also say that debt reduction leads to a motivating factor so strong that you really enjoy following the process to reduce it further.