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July 11, 2011 / 74

A Message to Congress and President Obama

As an accountant, and also (mostly) as a person who has been deep in debt, I can tell Congress and President Obama how to resolve the debt crisis.

First a bit of background… I’ve been in debt – deep in debt. There was a time when I would “couch dive” my own couch looking for quarters to buy milk for the kids. I picked up pop bottles and cans for “extra” money so I could make it those last few days to payday. My credit was exhausted – so I couldn’t just go out and borrow more. And unlike the US government, I couldn’t just print up more money.

So – how did I get out of debt? It’s really very simple. I call it my “Two Step Plan.”

Step 1 – stop borrowing.

No matter how painful it seems, you MUST kick your addiction to spending money you don’t have. As I’ve said before, It’s a sure bet that a guy who tells you that you can get out of a hole by digging deeper is selling shovels. That’s what I did. I stopped digging. Period.

The first thing you’ll notice when you stop borrowing is that your standard of living will drop. That’s because you have been living “beyond your means” – or to put it another way, you’ve been spending money you don’t have. Sure – I’d have liked to go out and buy a Lamborghini or maybe save a bit of money and get me a Ferrari or a BMW – but I only made about 8 or 10 thousand a year. So no matter how much I’d have liked to do that, I just didn’t have the ability. I had an old Chevy that got me to work that was paid for – so the difference between owning a fancy sports car and the Chevy is a little thing known as solvency.

Step 2 – Pay off what you owe.

I was working a job that didn’t pay me very much. At the end of the week, there just wasn’t much “left over” – but after I eliminated a few things that I’d considered “necessities” before, I found that I could make my payments plus a little, and those “necessities” weren’t. And as long as I didn’t borrow more – eventually I’d pay off the debt. It doesn’t happen fast – it seems to take FOREVER.

If you are so deep in debt that you can’t make your payments, then you have to look at other options. Like getting another job. Either a new job where you make more, or a second job. Put another way, you have to maximize your resources. Does that mean you stick a gun into your boss’s face and demand a raise? Nope. And if/once you increase your income, DO NOT THINK YOU HAVE MORE TO SPEND!!! What you have is more to pay down that debt with. Make bigger payments, etc.

At one point, I was so far in debt, I barely had enough money to feed my family, and I did NOT have enough money to make all of my payments. What did I do? I called my creditors and talked to them. I worked out repayment plans with them that were acceptable to them and that I could do. (Once you give your word to do something – DO IT!!!) I told one creditor I told that I would pay him every other month and he was okay with that because it beat losing everything he’d loaned me, and he eventually got paid every dime I owed him plus the interest. When I told another that I could only pay her $5 a month, she said, “But the interest is $7 a month!” I said, I know. but it’s better to go $2 a month into the hole than $7 a month. She was so impressed with my willingness to do something, that she offered me a deal – She said if I’d pay $10 every month, she’d stop charging me interest. I took her up on her offer, and cut another creditor’s payment. (One I hadn’t talked to yet. ;-D) The debt was paid in about a year and a half.

But the key here is to TALK to your creditors and BE HONEST with them. I know that’s a hard thing to do – but if you can’t make your payments, creditors would rather you be honest with them and work with them than just default. One even offered to loan me more money – he called it a “consolidation loan” – and he was even willing to give me “extra”. I turned him down and put his payment at the END of the line.  (See shovel salesman above.) He wasn’t willing to help me get out of debt – he wanted to get me DEEPER in debt. He was not my friend.

And the creditors who are unwilling to work with you? Well… I just said take it or leave it. That took a little hard-nosed negotiation. If they still didn’t want to do what I said I could do, they got nothing until everyone else was paid off, and meanwhile I allocated their planned payment to someone else. So you see… working your way out of debt HAS GOT TO BE A TWO WAY STREET!!! Creditors who won’t work with you – well, they are not important to you. Default? Well… I just figured that it was as much their fault that I was in the hole as mine – after all THEY were the idiots who loaned me all that money they had to KNOW I couldn’t pay off any time soon. ie they were trying to enslave me (owing all of your pay check and more to creditors is called being a wage slave.) And what really happens when you default? Well… people become reluctant to loan you money – which given your lack of self control would be a GOOD thing!!!

Eventually, after YEARS of making payments as low as $5 or $10 a month, I paid off every single one of my debts – one at a time.

But like the government, I saw what seemed to be a good idea that would improve my situation – and allow me to increase my income. So once again I borrowed  (to go to college). It seemed like a good idea at the time… but then going back into debt ALWAYS seems like a good idea at the time. It wasn’t.

Once again I made my payments, and within a year, I expect to once again be debt free and hopefully stay that way. I will stay that way by looking at what I WANT, and figuring out if I can PAY for it. Not can I make the payments – but PAY for it. If I don’t have the money, I must do without it until I can save enough to PAY for it. It’s cheaper that way anyway because you don’t have to pay all that  interest – which means you can afford to do/buy MORE than if you’re borrowing to spend.

Now for  Congress and Mr Obama.

Some of the proposals I’m seeing come out of your faces are just plain bad ideas.

Like Mr Obama – you want to raise taxes. On one hand, that’s the equivalent of going to the bank and sticking a gun in the teller’s face, only the citizens are the bankers. Will forcing your “boss” to give you a raise get you out of debt? No, because you have exercised NO self-discipline and you will not have reduced your standard of living – in fact, if it’s easy to do you’ll just spend MORE. Look at the history of tax increases that are supposed to help the government “live within it’s means”. They ALWAYS lead to HIGHER spending levels, and to the government borrowing even MORE. Higher taxes is NOT the way to go because that honeypot has a bottom – and you’ve pretty much reached it. And if you keep forcing your “boss to give you more and more, pretty soon he’s going to go out of business and then where will you be?

And Congress – You want to keep buying stuff so the people back home LIKE you, ie make your payments without reducing your standard of living. You are the original boyfriend who “just can’t say no” to his girl friend. You think that you can buy favor with the voters, and maybe you can. But since when does giving a fractious child candy make things better? Yes – of COURSE the people want you to “give” them money and things because most people think it’s “free” money – government money comes without “cost” they think. But nothing could be further from the truth than that notion. So you must decide whether it’s good for the nation! THAT’S PART OF YOUR JOB!!! Just as the parent’s job is to say “NO!” most of the time, so too it’s your job to do what’s best for the nation – NOT what’s best for individuals who live here. You are to “promote the GENERAL welfare” (infrastructure)  – there is NO MANDATE TO HAND OUT INDIVIDUAL WELFARE!!!

In summary – to get out of debt you:

1. STOP BORROWING!!! (ie stop spending more than you receive.)



So Congress and Mr Obama – get your stuff together and first figure out what EXACTLY what the nation NEEDS, and then what your job is, then how best to do it WITHOUT SPENDING MORE THAN YOU TAKE IN.


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