Pay off debt by the numbers

The numbers. According to statistics, almost 80 percent of adults in the United States have some form of consumer debt. Owing money seems to have become a way of life, although a staggering 70 percent of those in debt consider their debt load to be undesirable. The question begs to be asked, “why do people put themselves in such a position to get into debt when they don’t want to be?”

The answer to the question is not simple and clear. In some cases it may involve personal spending habits, while in other cases it may be related to a set of unforeseen circumstances. Either way, debt can cause unhealthy stress, and sometimes people can be quick to judge. Neither being stressed nor being judged is particularly helpful and can lead to depression, feelings of failure, and strained relationships, among other negative things. So perhaps a better question to ask is, “what can someone in debt do to change their circumstances and find a way out?”

A pull in different directions. Kind of like raising children, there is no single “right” way to do it, yet everyone seems to have an opinion on the subject. As a consumer looking for answers, it’s all too easy to get sucked into one camp or another regarding which regimen to follow. There is no shortage of financial experts, books, and methodologies geared toward people who need a little financial wisdom. The problem is that many of the pre-packaged debt settlement programs treat the journey to debt freedom as a cult-like religious pursuit rather than a progression toward financial literacy and financial independence.

Instead of taking a “one size fits all” approach, it’s important to consider debt, income, expenses, and financial goals in context with the individual’s household, habits, and goals. There are two parts to the debt settlement equation: the math and the individual’s lifestyle. To be effective, any solution to get out of debt must address both.

The method. Math is the easy part. Mathematics is sterile. Mathematics is cold, practical. It is not influenced or affected by opinions or emotions. It’s predictable, no surprises. Unfortunately, however, it is also very misunderstood or perhaps intimidating to people who are not math or analytics experts.

Tea Lifestyle part is what is difficult. Anyone who has ever made a New Year’s resolution (and failed) knows exactly what that means. People have the best intentions to improve their situation in life, but along with the temptation and emotional ups and downs of triumphs and setbacks, people’s “wants” often trump their “needs.”

Between the two, it is essential to find a workable balance. Here’s the meat and potatoes of a good, solid, deliverable plan to get out of debt and start making progress toward healthy finances:

• Brainstorm and scale amounts. People are rarely successful if they make drastic changes or take off their clothes all at once. Small cumulative changes make big differences. Order the medium instead of the large. Turn the thermostat back two degrees in the winter or up in the summer. Find out what isn’t being used, like landlines or premium TV channels, and scale back. Then calculate the monthly savings and, instead of spending it elsewhere, apply it to debt.

• Create a budget. Creating a budget is more than putting planned numbers in rows and columns and then trying to live by them. Budgeting effectively involves brainstorming ways to reduce costs without reducing quality of life. It is an example of finding the balance Between the Math and the Lifestyle. By applying brainstormed savings and debt reduction amounts, family budgeting allows for progress toward becoming debt-free without drastic lifestyle changes.

• Redirect cash flow. Instead of direct depositing paychecks into a checking account with zero percent interest, maybe open a high-yield online savings account with 2% to 3% interest. Let the money accrue interest in the account, and then move the money in batches once or twice a month for bill payments. The end result, simply by redirecting the direction of cash flow, will add substantial resources to pay down debt effortlessly.

A few simple changes in habits can make paying down debt simple and easy without having to live on beans and rice at every meal. In most cases, minor changes that require little or no sacrifice will have the benefit of saving years and potentially thousands of dollars in interest on consumer debt.

As a general rule, people adopt habits that do not deprive them of what they want. Therefore, a balance between math and lifestyle is the key to sticking to a debt repayment plan rather than systems that rely on willpower or require self-deprivation. Take the time to improve financial education they can make it possible to “have your cake and eat it too”.