Do you struggle under the mounting pressure of debt…personally and/or in your business? You are not alone. The statistics on debt are troubling:
• The average American household has 13 payment cards (credit cards, loan payments and store cards.)
• Americans carry, on average, $8,000 in credit card debt from month to month. If you were to make only the minimum monthly payment on that debt, at 18% interest, it would take 25 years to pay off and cost you more than $24,000 in total.
• 46% of all Americans have less than $10,000 saved for their retirement.
• 96% of all Americans will retire financially dependent on the government, family or charity.
• Only 2% of all homes in America are paid for.
I got these statistics from a website offering debt consolidation services. Unfortunately, most folks misunderstand and misuse these services…and get further into debt. These services can be creditors in disguise.
So, deep breath. No matter how much you owe, you can bring your debt down. The key ingredient is your commitment. The steps are pretty easy.
“The definition of easy is ‘something you can do.’” ~Jim Rohn
Step One: Get to a KFP – Known Financial Position. Clean up your business Balance Sheet. Create a personal, family Balance Sheet. Have your bookkeeper and/or accountant help you. On the Balance Sheet, the section called Liabilities is what you owe; it’s your total debt. Not looking, being in denial, that’s how debt builds up. Be willing to confront the situation. Once you know, you can start bringing that total debt number down.
Step Two: Start selling at the right price. Include debt reduction dollars in your Budget. Your customers will have to assume some of the burden of your debt in order for you to create dollars to pay it off. Include in your selling price enough salary to contribute to paying off your personal debt and enough profit to pay down your company debt. You may have to improve your marketing, sales, service and production skills to charge more and “get to yes.” So be it. You deserve it. And your customers will pay more for a great value.
Step Three: Stop buying stuff on credit. On an episode of Saturday Night Live they aired a ‘spoof’ TV commercial for a new debt reduction book called, “Quit Buying Stuff You Can’t Pay For.” Genius.
Step Four: Read The Richest Man in Babylon by George Clason. This slim book uses a story to teach the basics about reducing debt and increasing your wealth. This timeless classic was written during the Great Depression and offers spot-on advice. Set up a payment schedule, as suggested in the story ,and hold yourself accountable for following through with the next few steps…
Step Five: Talk to your creditors. You may be able to work out a better interest rate or payment schedule. Your creditors don’t want you to declare bankruptcy.
Step Six: Start saving. A little bit every month adds up. George Clason suggests 10%.
Step Seven: Systematically pay down debt. This is the easy-hard part. It is easy to do it. The problem is it is easier NOT to do it.