Stop Digging: No More Debt

A solid post-bankruptcy strategy is based upon living debt free. In my consultation I also talk about debt, credit and the type of good and bad credit you should consider (and not consider) following your bankruptcy.

There is an old saying: “If you’re in a hole, stop digging.” Well bankruptcy or any major financial distress gives a siren call to stop digging, and in most instances of financial disaster, the shovel is ripped from your hands. You have no choice but to stop digging (i.e. spending money you don’t have or could be savings).

This actually is a good thing.

The next question is will you pick up the shovel again after you bankruptcy?

The FRESH START System advocates living on a cash basis. If you can’t afford to pay cash for a purchase, you can’t afford it, and as soon as you begin to consider using credit, you have picked up the shovel again.

If you enter a store, with or without credit cards, you should ask yourself can I really afford to pay for this thing – I don’t care what that thing is, can you afford to pay cash for it today? Next, do you really need to buy it? If you’re honest with yourself, (especially with discretionary items like clothes, electronics, cell phones, books, movies, etc.) the answer will come easy.

Here is an interesting exercise: Go back through your credit card bills and other things bought on credit prior to bankruptcy (some of you may have already thrown them out), but if you have not, than look through six months or a year’s worth of bills and take a look at what you purchased. Were any of these things, stuff or experiences (entertainment, movies) that you bought, could they be defined as “needs”, “wants” or “for appearance sake”

Needs

Did you buy something because you needed it – like groceries, pay an electric bill, gas. Did you pay that credit card bill (or that portion of that credit card bill that comprised that purchase in full the next month?).

If you didn’t pay in full, than you were financing your living expenses using debt. This situation is like the canary in the coal mine – it’s an early warning signal that will eventually financially suffocate you since you are not living within your income.

I refer to this situation as financial distress – self created stress or living beyond your means. There may be a very good explanation for you doing this because of an unexpected bill (car repair, medical expense), but the continued use of credit to finance the essentials signals trouble.

There are two cures: increase income or cut expenses. Increasing income is a great solution, but unless you are actively building a secondary income through a second job or sideline business, it usually not a realistic remedy. More importantly, what if you magically got a raise that month (or a long anticipated raise or bonus) are you going to spend this money or save it. Spending usually follows increase in income. Let me give you a good example: Did you get a tax refund this year? Did you save that money or spend it? With some folks, the better question is when did you actually spend it – before or after you filed your tax return?

Wants

Did you buy something because you just wanted or perceived you needed it? These kinds of things usually include clothes, cars, boats and other big ticket items that you thought you could afford based upon the low monthly payment. Salesmen are excellent at selling you on the payment.

Now ask yourself: (1) Do I still have it (sold, repossessed, thrown away, collecting dust in a storage unit); (2) was it really worth it (how much enjoyment did I get out of it? Did you take that boat to the lake every weekend or did it sit in the driveway 51 weekends out the years that you owned it); (3) did it really make a difference in my life.

Now, here is a real difficult question, did I buy that car, clothes, boat (whatever) because of the way it temporarily made me feel – if your honest, and answer this question “yes” you were borrowing to look cool, justifying a new vehicle because of its fuel economy or reliability – whatever. It does not matter. You were renting a lifestyle you could not afford.

The fundamental principal behind the FRESH START System is to avoid these same mistakes in the future. I really don’t care why you bought something or the fact that you ran up a huge credit card bill or bought something that you couldn’t afford. What I do care about is changing your attitudes towards money so that in the future you life benefits for the clean slate bankruptcy provides.

You been handed the keys to self imposed jail cell and shown the exit.  Don’t go back – it’s your choice.

For Appearance Sake

In the 1980’s there used to be a popular television show called “Lifestyles of the Rich and Famous” were the host Robin Leach breathlessly told the audience what some rich guy’s house, car and jewelry were worth. I still remember watching an episode that featured an international arms merchant’s (today we call these people gun smugglers or terrorists) gold plated bathroom fixtures – in his private 747. Today we have shows like MTV’s “Cribs” displaying all the stuff of the rich, famous and those looking to look rich.

These images have had a profound impact on our thinking, habits and attitudes toward money, spending, savings and lifestyle. My goal with FRESH START is to help you start to lay the foundation for a real sustainable financial future – not set you up to live another short term leased lifestyle so you can temporarily look rich, cool, smart, sophisticated – whatever.

Live the Cash and Carry Lifestyle

Remember the phrase: COD or “cash on delivery” – most small business owners know what this means. If you’re just starting in business or your finances are a mess your suppliers will continue to sell to you only on a COD basis. That is the way your monthly budget should be run – on a cash only basis.

Disclaimer

Fresno-Bankruptcy-Lawfirm.com is owned by the Law Offices of Jeffery D. Rowe. We are a debt relief agency. We help people file for bankruptcy relief under the Federal  Bankruptcy Code (Title 11 of the United States Code). If you would like to discuss your situation in further detail, please call our offices at: (559) 228-1500 to schedule a consultation.