HOW TO GET OUT OF DEBT; INSPIRED BY SUZE ORMAN



Is Your Thinking Making You Poor?

While folding laundry last night I caught a glimpse of the Suze Orman show. Quick synopsis; gym teacher wife, electrician husband, take home income $5,000 per month, outgo $8,000 per month. That’s a net overage of $3,000 per month going on the credit cards. All credit cards now maxed out. Family consists of 4 kids from baby to 12 grader.

Problem, mom handles all the money and can’t say no. Dad wants no money involvement.

Get out of debt. Just say "no".

Get out of debt. Just say “no”.

My observations:

This is much more than a money problem. $5,000 per month take home pay is not a fortune, but certainly enough to live on in most parts of the country. Part of her outgo consisted of a car loan (or two) for $700 per month. Her hubby’s beer budget was quite large as well. After Suze went through and cut everywhere she could, the couple was still spending $1,800 more than they were taking in.

Suze Orman’s recommendations (abridged):

No gifts at all, that includes Christmas and birthdays.

Revamp the cell phone contracts, they are way too expensive.

No eating out.

The older kids need to contribute part of their part time job earnings to the family budget.

Hubby has to pay the bills every week along with the wife and they both need to face up to their financial reality.

Both need to take on more work. Mom needs to earn during her summer vacation and dad needs to take on extra electrical work.

Her final admonishment went something like this;

“If you said “No” more along the way, you wouldn’t have to cut back so drastically now. You created this situation and only a dire change in lifestyle is going to get you out of it.”

Do money problems stem from your beliefs?

This mom believed in order to be a good parent she needed to say yes to all of her children and husband’s requests. Saying “no” was a personal failure.

Suze role played with the mom by pretending to be a child asking for $50 to go out with his friends. The mom had to say “no”.

You could see the pain and trepidation in the mom’s voice when she said “no”. The distress was painful to watch.

The mom’s internal script clearly got her into this position.

If I had to guess, Mom believes that “a good wife and mother gives her husband and kids whatever they want.”

It got me thinking, how many of us feel that we can’t say no to ourselves and our children? We believe that if we have a job, are working hard, then we deserve to buy whatever we want.

Is that you? Do you believe you deserve to spend since you work hard?

It took maxing out all credit cards and facing bankruptcy in order to get this family to confront their debt and money mismanagement.

Do you avoid paying the bills and looking at the balance on your credit cards?

Do you believe that you deserve to spend?

Are you avoiding your own financial reality?

If so, all the financial advice in the world will not help until you decide to confront your money beliefs. Farnoosh Torabi talks about how to Psych Yourself Rich and Dr. Charles Richards talked a lot about how your mind influences your wallet in The Psychology of Wealth. With a Masters in Counseling and a husband who’s a Psychologist, I know more than a little about how our mind impacts our behavior.

In this family’s case, they needed to approach rock bottom in order to take action. What about you? Are you willing to confront your money beliefs, evaluate them, and start spending smart?

Where to Begin in Getting Rid of Debt?

Start with your mind.

Like any other life change; losing weight, exercising, getting a new job; the first step is awareness of the issue.

Face Reality

You know you have a debt problem if you spend more than you earn and cover the difference with credit cards. If you have no emergency fund and minimal savings, then you have a problem. If you buy without thinking, you have a problem. If you indulge yourself and those around you with material goods you cannot afford, you have a problem.

Once you accept that your finances aren’t where you need them to be and that you have too much debt, you’ve taken an important step.

Acceptance of the problem is the first step in getting back on track.

What do you say to yourself before you spend on “wants”?

Start by assessing what you say to yourself before you overspend.

Which of these self statements ring true?

1. I’m depressed (or happy or sad), I’ll shop to cheer myself up.

2. I had a hard day, I need  a reward.

3. I want my kids to have whatever they want.

4. I work hard, so when I want something I deserve to have it.

5. My mom (husband, wife, kids, dad) is so great to me that I must buy her the newest Coach bag for $450, otherwise she won’t know how much I appreciate her.

6. We deserve a cruise vacation because we work so hard.

7. I want my kids to fit in so I buy them designer clothes.

8. I have to have the latest iphone upgrade because ______________.

9.

10.

Take these steps to begin the journey out of debt:

1. Write down everything you spend. Get the family on board to do the same. Get a notebook or an app (I like the Debt Myth.com “Pay Off Debt App“) and track every cent you spend and all of the bills you pay.

2. Before you spend a cent, write down what is going through your mind.

How to keep track of spending and thoughts:

Situation: You and the kids are at the convenience store and the kids run to you with packs of candy and small toys.

You think: “I’m working all day, I’ll reward them with treats?”

Write down in your spending diary: Snacks, toys, candy-$12.00

Track spending and thinking for a month. If a month is too long, try it for a week.

What do you notice? What do you say to yourself when you’re spending on wants, not needs? Analyse what you are thinking before you spend. Practice this activity for awhile. Notice any patterns and evaluate whether you are spending and living the way that is best for you and your family.

What are your unhelpful thoughts when spending on wants and splurges?

image credit; google images

 

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11 Responses to HOW TO GET OUT OF DEBT; INSPIRED BY SUZE ORMAN
  1. krantcents
    May 20, 2013 | 4:58 pm

    There is a famous quote attributed to F. Scott Fitzgerald, “The rich are different from you and me.” And, Hemingway is quoted as responding: “Yes, they have more money.” Rich people think differently about money! I always want value from my expenditures and I want my money working and growing.

  2. Little House
    May 21, 2013 | 9:45 am

    I sometimes have difficulty saving no, but I’m such a number cruncher that if we just can’t do it, we put off a purchase. I’m thankful that Mr. LH helps me with the finances when times get tight – we make a plan together to manage our finances better when we have to. Working together is so much easier than going it alone!

  3. William @ Bite the Bullet
    May 21, 2013 | 10:49 am

    It’s interesting how many pro athletes and lottery winners end up where they were when they received their windfalls: broke.

    It’s equally interesting how many millionaires, after going broke, end up being millionaires again.

    Those two tendencies, put together, tell me our financial status reflects on who we think we are, and not amount of money (or shortfall) change that… until we make a decision to change.

    Just like you say: step one = the mind.

  4. John S @ Frugal Rules
    May 21, 2013 | 10:53 am

    Good post Barb! I think allowing yourself to get into mindset of deserving to spend because you earn a certain amount of money. Like KC said, rich people are that way because they think and view money differently. Allowing yourself a simple pleasure because you’ve worked hard is one thing (as long as it’s done within reason) and not saying no is a completely different thing altogether.

  5. Jules@Fat Guy,Skinny Wallet
    May 21, 2013 | 2:35 pm

    So interesting! I don’t agree that the kids should have to contribute their earnings. I mean they shouldnt have to pay for parents inability to manage money. They should however have to earn all their own spending money to go out with friends etc. Great post!!

  6. Barb
    May 21, 2013 | 3:41 pm

    @Krantc-Great summary, get value from your money, save, and make your money grow by working for you.
    @LH-Sounds like your family has a great system set up that works for you. And, you understand your own weaknesses. That’s really important.
    @William- I know so many very wealthy people who are quite conservative financially. I think there is that correlation, if you are a spendthrift, you can overspend regardless of your income level.
    @John, I’m all for rewards and splurges; otherwise, what are we working for. Yet be sensible. Don’t undo smart spending by splurging extravagantly.
    @Jules-In general, you make a good point, but in this case the family has their backs to a wall. Even though it’s the parents misspending that got them into this position, the kids also benefited. I believe it strengthens kids to handle adversity.

  7. AverageJoe
    May 21, 2013 | 11:58 pm

    My unhelpful thoughts when I’m spending on wants? I think to myself all the reasons why “I deserve this now.” That leads to buyers remorse even before I buy the item, because I get caught up in a circle of “Do I really deserve it?” Of course, this is completely the wrong line of questioning. It isn’t “Do I deserve it.” The right question is “What am I really going to do with it” and “will this really make me happier?” The answer to those questions, in many cases, is “No.”

  8. Barb
    May 22, 2013 | 3:34 pm

    @Joe, Thanks so much for letting us into your mind. The fact that you actually are aware of your thinking is wonderful. AFter all, you cannot counteract unhelpful thoughts if you don’t know what they are!

  9. Marie at Family Money Values
    May 23, 2013 | 9:37 am

    Nice post, yes, everything starts with what’s in your mind.

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