Wednesday, May 16, 2012

How to be Free - Part 1

I recently saw a thread on a forum I eyeball in which a woman was asking how she might get out of debt. It's a frightening prospect, daunting even, but let me reveal to you the secret Dave Ramsey would never tell you.

You are bound with paper chains.

Let's say you owe money on a couch because you thought you might want a place to sit but couldn't afford one. Or more likely, you didn't like the cheap ones at Goodwill, sitting on your neighbor's curb, or at Walmart and decided to buy a big fancy one you would never have been able to afford.

Call the company today and tell them you're not paying them any more and to come get their couch. Then you sit on the floor. See how easy it was to get out from under that debt? They're going to ding your credit score now, but that doesn't hurt you. More about that later.

Let's say you owe money on a credit card because you bought some stuff for the house. (Most likely at least half of that stuff is no longer working and has been put out by the curb. Everything they sell is junk these days.) This is commonly called "unsecured debt". The company gave you money and you promised to pay them back or they would ruin your credit. It is, in essence, blackmail.

Call them and tell them you won't be paying them any more. They're going to threaten to ruin your credit and nobody will ever loan you money again. GOOD! You have already demonstrated that you can't be trusted with credit, so it's probably best after all if you don't have any more of it.

Same with your car. You decided you needed the newer model instead of buying some old beater. Stop paying them and then tell them to come get the car. The money you would have put towards a payment can be the money you spend buying another car. It will probably be a fixer-upper that clunks and rattles down the road, but you'll own it. You won't be driving around the bank's car.

If you follow what I effectively call the "screw the banks" plan then pretty soon you're going to be debt free, or at least down to your giant mortgage. Your credit will be ruined, but what do you care? You're now resolved to never borrow money again anyway. Even with bad credit, you'll still need to firm up that resolve because now you'll be getting even MORE credit card applications in the mail. You're a higher risk which means they can charge a higher interest. You're now attractive to a whole new market of creditors, whom you should avoid at all costs.

So now we're down to just a mortgage. You've become almost debt free in about 30 minutes worth of phone calls. Way to go. I wish I'd thought of this back when I was struggling with credit card debt instead of eating Ramen noodles for 5 years to pay off those sharks.

What to do about that mortgage? It's huge. Your house may have lost 30% of its value in the past year and you've managed to build up almost no equity, but hey, a man's home is his castle, right? Nope. It's not your home. It's the bank's home. You live in it, keep it up, and pay the outrageous property taxes on behalf of the bank. In 30 years it might be your house, but at that point you will have paid 3 times its value and replaced almost every stick and board in it anyway (because it's most likely some shoddy thing thrown together by shoddy contractors who just wanted to make a quick buck).

When I get around to part two of this then I'll explain what to do about that mortgage. That's the hard part. It will require sacrifice, hard work, and a significant loss of prestige and what the world likes to call "living quality". In return, however, you get to be free. Some folk will think that's a good trade off. The others will shrug and decide that their slave collar isn't that bad.


Gorges Smythe said...

I can just hear all the gasps!

Bluesgal said...

No gasp here. Every now and then I get the urge to buy a new couch and redo the living room. I have the $$, no credit needed, but I'm not sitting on the floor. Thanks for reminding why I don't do it. I may want it... but I don't NEED it.

I choose to be debt free and that is more comfortable than a new couch.

Snowdancer said...

I'm sorry but my Bible says to pay what your debts, always, not just when it's convenient. Unless a gun was held to a persons head, they chose to go into debt for items that they didn't want to save up and buy with cash.
Skipping out on those agreed upon debts is the same as theft.