Breaking Free of Financial Bondage
I wrote this monograph in the
early 90's so some of the terms may be antiquated BUT the financial principles
have remained the same. I hope these principles help you. Financial
freedom is possible!
by Dr. Ken Matto
- DEBT! The very word reeks of slavery. How many times have you made a final
payment and felt a feeling of relief? You realize now that you have made a financial
accomplishment by getting out of debt. But you did not purchase this monograph for me tell
you congratulations for getting out of debt, you purchased it because you are in debt and
you need to come out of it as soon as possible, no matter how it hurts and believe
me it is going to hurt.
- The reason you are in strapping debt is because you lack one required fundamental
principle of living and that is "DISCIPLINE." A person who lacks
discipline in finances, lacks discipline in every other area of life. Getting into
debt does not require a decision, it represents a lack of decision because if you
are thinking rationally, why would you want to enslave yourself with thousands of dollars
at 16-19% interest. Don't think at this time that if you had a lot of money or if you hit
the lottery your financial problems would be over. HOOEY! Having much money without
discipline will wind you up in the same hodgepodge you are in now except the debt would be
larger because the toys you buy would be much larger and more expensive.
- I have seen people on TV who hit the lottery or these $10 Million dollar sweepstakes and
go out and buy 4 cars. Before they hit, they owned 1 car, why would they buy 4 cars? They
have no discipline because they are deceived into believing that $10 million dollars is an
endless pot. It is not, because the most they can spend is $10 million. It sounds like a
lot of money, and it is, but normally it is paid off over time, normally 40 years, which
means $250,000 per year. Now if the fellow that bought 4 cars instantly paid $100,000 for
them, he has already spent a good portion of it because out of that yearly check comes
taxes which normally amount to about $80,000 per year. His first year he already lost:
- $100,000 on 4 vehicles
- $ 80,000 on taxes
- Leaving a total of $70,000 for the first year.
- If he quit his job and If he owns a house, that $1347 per week must sustain all living
expenses like home, life and health insurance, groceries, emergencies, etc. If he spends
over his $70,000, then he goes into debt counting on future checks to alleviate the debt
and has become like many who pre-spend what they do not have.
- MY PERSONAL TESTIMONY
- I know what financial bondage is and how it can ruin a life. In 1981 I was between
$12-15,000 in debt and that was putting me in a difficult position because my salary was
$13,500 and this debt was above and beyond necessary bills. I had a rich friend who was
very cheap and to impress him and other around me, I would take out loans to show others I
had a good income too. I was lying plus I never impressed anyone. The only one who was
impressed was me. It was self-deception outright.
- I was almost ruined because I worked for my creditors and was unable to get myself into
positive balance or better known as "in the black." I thought nothing of
whipping out my credit card and buying something. I had credit cards with high credit
limits which I approached because of my rampant disregard for credit and its destructive
nature. Credit, when used properly and in the right situations can be an asset. I incurred
charges and cash advances without concern for payback time. I paid out tremendous amounts
of interest because rates were 18.6%, like today. When I was in heavy monetary bondage, I
more fully understood why people commit suicide because of the unending misery of
receiving a statement every month and seeing the interest compounded with more interest.
The minimum payment would cover the interest charges and just a very minimal amount of the
principal. It is designed that way. I was an impulse buyer and purchased things on the
most thinnest excuse I could muster at the time. I would buy things that I thought would
bring happiness to me but did not fill the void. I was a buyer and seller. I would buy
things and if I did not like it, then I would buy another model. Of course, all on my
credit cards because I was unable to save while operating in a personal debt economy. This
was my personal testimony of how I got into debt. What evil path did I follow? I WAS
SPENDING TOMORROW'S INCOME TODAY! I was not considering the fact that in the future
there would be layoffs, emergencies, or sickness, etc. A very dangerous thing to do and it
is the basis of 99% of all debt entrapment.
- It is the "who cares about the future" attitude. Go ask that question of all
the Senior Citizens who must work at fast food restaurants till all hours of the night to
supplement their Social Security benefits. Retirement should be a time of relaxation and
enjoyment because it is the final chapter in a person's life. A retired person should be
able to putter around their house or volunteer help in an organization, in other words be
free to enjoy what they couldn't when they were working. You are not free when you have to
watch the clock, put your grandchildren down and get dressed to go to work at 6 PM till
midnight. I personally know a woman who is 76 years old and puts in a full day's work in a
factory and works overtime when needed. Does she have to work? NO! She wants to work. That
is the difference, do you want to work or do you have to work? Abusing debt will force you
into the "have to work" mode. It is a sorry scenario to see a person go from the
job right to the cemetery, in other words from boxing up chicken to being boxed up
- WATCH OUT
- I want to tackle this subject in hopes of preventing financial ruin by misuse of credit.
Subtle traps are laid out for people to seduce their thinking. Some sayings that prey on
the lusts of the mind are:
- SYMPTOMS OF FINANCIAL BONDAGE
- You consistently think and worry about money
- You borrow from one lender to pay another to gain an extra month
- You are unable to pay off all your loans if they are called
- You work a second job to pay bills not to save for something
- You argue about money ( if married) - A word of advice, don't get married until you
learn how to handle money properly, and this applies to both men and women
- You are jealous of others who have enough money to pay their bills
- You have trouble sleeping at night because your bills pry on your mind
- You borrow money to make investments
- You have no budget
- You are constantly seeking get rich quick schemes (including playing the
- You have borrowed from everyone you know
- You have very little or no spending money left from your pay because you allot the
majority of present income to pay debts
- You are late on bill paying
- You pay only the minimum amount on credit cards or other loans
- You have maxed out your credit cards
- You substitute using credit cards to pay for everything instead of using cash
- You must pay bills with money set aside for other things like vacations, etc.
- You have no plan to pay down your debt
- Notice they all start with YOU because no one else is to blame for your
situation. These guidelines will help you identify problem areas in your life which may be
the result of financial bondage. Remember, the creditors want you in bondage because
they must lend to stay in existence, this is why they attempt to trap you by
systematically raising your credit limits. :Let me tell you how I know this is true. My
father was in the process of purchasing a used car for $6650 but he did not have any cash
on him and he does not believe in credit cards, so he was unable to put a down payment on
the car to hold it. So I took out my American Express Gold Optima Card which had a credit
limit of $7500 at that time so I could hold the car till my father went to the bank.
- When the dealer called AMEX and asked for confirmation of the total of $7116, AMEX
questioned me but nevertheless approved the transaction. AMEX was worried because I never
had a charge that big. My father paid by check and the AMEX transaction was not processed.
Within 3 months, my Optima credit limit went from $7,500 to $11,100 even though I did not
process that charge. They thought here is a high roller so let's get his credit line
increased. It's amazing, the same company that was worried I couldn't pay, suddenly raises
my credit limit by $3,600. Then they write and say that you are to be congratulated
because you are now a privileged customer. The only privilege I see is the privilege to
become more of a slave to their loan shark interest rates.
- SOME PRINCIPLES TO BUILD A CASH FLOW WHILE IN DEBT
- Can your car manage on the lower or middle grade gas? This can save about 10-25 cents
per gallon. Also, must you buy the name brands? I buy 93 octane for the same price as the
major brands' middle grade.
- If you smoke or drink, quit now. No more lying excuses, just do it. If there is one
thing that angers me it is someone complaining about having no money with a cigarette
hanging out of their mouth and a beer in hand. Can you really afford $5.00 per pack?
- Combine all your trips in one run if possible.
- Start brown bagging your lunch. This may save you about $30-50 per week which means a
total of $1500-2500 per year back in your pocket. Average lunch costs are $6-10 per day.
- Do you gab on the phone with people in other states? Let's say you talk to a relative or
friend for 30 minutes a week. Work a deal with this person that you call and talk for 15
minutes and then when that time period is up, they call you back and gab for 15 minutes.
You have made a 30 minute call for half price. Check with your phone company and see what
calling plans they have. Source long distance phone companies for the best rates, right
now it is a buyers market. Do you really need all the services you have like Caller ID,
Three-Way Calling, Paging, Cellular? When I purchased a cellular phone through AAA, I
canceled Caller ID and Three-Way Calling which took $9.58 off my monthly phone bill. My
Cellular monthly fee was $20.99, so instead of paying an extra $20.99 per month, I reduced
it to $11.41 per month. At that time I drove 31 miles one way to work and have bad knees
so I cannot change a tire and thought it would be a good investment for emergencies.
- Must you buy coffee on break? If your company supplies hot water, then buy instant
coffee and add milk. Here is an example. If you to go to Dunkin Donuts every morning and
buy a medium coffee (14 oz) and a donut at a cost of about $2.00, That equals
yearly. Purchase an 8 oz jar of coffee, half and half, and buy an 8 pack of donuts for
about $3. Savings would be close to $100 per year.
- Can you Carpool? I carpooled with a fellow when I worked at a job 42 miles from my home.
- Must you buy name brands on everything? I went to a discount drugstore and bought the
generic brand of Acetaminophen ( which is Tylenol) at almost half price. It got rid of my
headaches. Remember, you are paying for their advertising.
- Must you buy your clothes in an expensive store? Where I live I am 3 hours away from the
outlets in Lancaster, Pennsylvania. When I need clothes, instead of going to the shopping
centers close to home, I gather my needs and go to the outlets for lower prices on
clothes. For example, I purchased Van Heusen shirts for between $9-12. The same ones at JC
Penney were $28. One time I purchased 11 shirts and 3 belts for $130. Look around, you do
not owe any store anything. Remember you pay their salary. Thrift Stores are a good
place to visit.
- When a need arises, before you head to the malls, visit some neighborhood yard sales.
Not everything is junk, sometimes you will come upon an estate sale. I once purchased 5
working lamps for $11 in 1982. New lamps are expensive. I rewired them and they are still
with me to this day. Many people say they are afraid to sleep on a mattress that someone
else slept on, now if you have ever slept in a motel, guess what, the person before you
slept there last night, right where you are sleeping. Did you survive?
- At the end of the day, place all or some of your pocket change in a jar. You will be
surprised how fast it will grow. I once amassed $170 for a vacation by saving quarters. I
still save them and they grow very fast.
- Must you plan a very expensive vacation? In 1989, I went on vacation with a friend and
it cost less than $500 for the week. We visited Plymouth, Salem, and Boston,
Massachusetts, then we went to Gettysburg and Lancaster County, PA. We had a full and
enjoyable week and it did not break our wallets either. While getting out of debt, plan
day trips! This is a good way to get away once in a while. It will also get you to think
that if you had more disposable income, you could enjoy it instead of your creditors
enjoying it. It would be a cudgel to move you out of your present situation more seriously
- If you receive an advertisement in the mail and feel you want to buy the article
they are advertising, then put the ad away for three weeks. After three weeks, take out
the ad and destroy it because if you could survive those three weeks without it, then you
do not need it.
- Another way to build a cash flow, is when you receive your check and take out spending
money for the week. Anything that is left over, put it aside and out of sight. Let's say
you get $80 per week spending money and you only use $61. Then take that $19 and put it
- These are some root suggestions to help you build a cash flow. Of course, these are only
suggestions but the principle can be carried over to and conformed to your situation. If
you follow these principles you will begin to climb out of the pit. Do not take any of the
saved cash and put it toward a bill. Let me explain. Let us say you followed these
suggestions and saved $150 per month in cash. If you put this toward a bill and an
emergency expense comes up then you will be adding more debt by charging the expense. If
you have the cash ready to pay for it, you will have avoided another charge, saved the
high interest and you have taken a step toward freeing yourself.
- Now let's suppose you paid a bill for $75 out of your saved money of $150. That leaves
you $75. Combine that with next month's savings of $150 and you have a total of $225. Once
I needed new shoes and sneakers and had about $130 in change saved. I purchased 3 pairs
without charge cards or denting my budget. The "leftover cash" principle
works. Start today and begin to feel freedom when you start paying with cash.
- SOME PRINCIPLES AND SUGGESTION FOR GETTING OUT OF DEBT
- GIVE YOUR CREDIT CARDS AND CREDIT LINE CHECKS TO A FRIEND
- Do not cut them up because in a moment of weakness it is too easy to call the credit
card company and say your card was lost. Then the new cards will be sent to you in a few
days and you will be back in bondage but if you give your cards and checks to a friend
then the account stays open and you have no way of accessing that account without the
cards or checks. The only thing you can do is pay off your balance and not create any more
debt. Remember you will start using your saved cash for purchases instead of the cards. As
I ponder this, tear up those credit checks and use them for compost. Those checks make it
look like you are spending money and not incurring debt. Remember, deception is a great
tool of the lender BUT IT WORKS.
- REJECT CREDIT LINE INCREASES
- One of the ways a lending institution rewards its good customers is to offer them the
opportunity to become a greater slave to them. Many banks increase credit lines and tell
you it is your reward. Call immediately and have your credit line lowered. Many banks give
out credit lines of $5,000 and up without batting an eyelash. Call your creditor and tell them
(don't ask) that you want your credit limit lowered to $1,500. If they refuse, then tell
them you are closing the account, they will lower it and then in a few months will
probably raise it up again. Remember, it is important to understand that banks need you in
debt to procure interest because without it they cannot exist. Do not become a slave to a
bank, the rewards are only heartache.
- REFUSE NEW CREDIT CARDS
- Banks are constantly sending out pre-approved credit cards which offer lower interest
rates. Those rates are only good for an introductory period like 6 months. READ THE SMALL
PRINT! The large print giveth and the small print taketh away. Tear up the application
immediately. You only need one Mastercard or Visa. Where they take one, they normally take
- Keep this principle in mind. CREDIT CARDS ARE NOT MONEY, THEY ARE DEBT INSTRUMENTS! If
I have $1000 in savings and a credit card with a $2000 credit limit, I do not have $3000,
I have $1000. You must begin to retrain your thinking. Who stands to make the most
out of your uncontrolled debt? YOU or the bank? Think of yourself in business terms. What
are your assets versus liabilities? Financial survival depends on this fundamental
principle. You need to think of yourself as Chief Financial Officer of your Life.
Business utilizes 2 ways of capitalization: 1. Selling Stock which is called an equity
security; 2. or, Selling Debt such as bonds, debentures, commercial paper, etc., these are
called debt securities. Did you notice what did not appear under Capitalization?
BORROWING! Why? Because borrowing is not capitalization, it is DEBT! Just like credit
cards, when you use them they are not raising capital but acquiring debt. DEBT IS NEVER
- BUY A USED CAR
- If the need for a car arises while you are in financial bondage, buy a used one or find
out how much it would cost to change the engine if the body is in good condition. Let' say
you have a car with a good body and the engine costs $4000 to replace (4K is high end of
spectrum) and you get a 50,000 mile guarantee. It sounds like a lot of money. Your friend
goes out and buys a new car for 12,500. Pays it out for 4 years. You take the $4000 and
stretch payments out for 2 years. Let's pretend a perfect world, no interest charges. You
both average 10,000 miles per year.
- Your monthly payment is: $177 (includes sales tax)
- Your friend's monthly payment is $273 for the car. (includes sales tax)
- Your insurance premium stayed the same and you paid only $240 in sales tax.
- Your friend's premium increased about $500 per year. (conservative estimate)
- After 2 years your bill is paid with 3 years left on guarantee.
- After 4 years your friend's bill is paid. Here is the stark reality of buying a new car:
- Sales Tax 6% ------------------600
- Payments -------------------12,500
- Insurance increase---------2,000
- Total-------------------------- 13,700
- By having your engine replaced instead of buying a new car, the first 2 years you saved
$2610 but the second 2 year time period you saved $6850, bringing your total savings to
$9450 over 4 years, which averages out to $197 per month that went to you, not the finance
company. If you would place that $197 per month in a fund or savings plan which paid 10%
ANNUALLY, you would have $11467. By doing it this way, guess what, you can buy a new car
and pay it out cash.
- When you are out of financial bondage, then you may buy a new car, provided you can put
down at least 50% of asking price. The balance can be financed with controlled debt. (I
will speak on controlled Vs. uncontrolled debt a little further on.)
- BORROW FROM RELATIVES
- This is a personal principle which can work quite effectively. Previously I mentioned in
my "Symptoms of Financial Bondage" section that you have borrowed from everyone
as one symptom of financial bondage. The difference between then and now, is before you
were borrowing in an uncontrolled manner, now you are borrowing to reduce debt. Let me
- I was $4,000 in debt as a result of a car accident and job loss prior to this, so the
bills I had were at the interest rate of 17-18%. I was steadily employed at the time. I
went to my parents and asked for a loan of $4,000. I VOLUNTEERED to pay them 7%
interest compounded monthly. I saved 10% off interest charges and they made 1 1/2% more on
their money than what they were getting in their passbook account. Owing to the reduction
in interest rates, the loan was paid off earlier than expected and I was not a victim of
loan shark interest rates. I told them they made more money dealing with me than the bank.
- Remember, do not force or guilt manipulate anyone into doing this, just give them the
facts and figures and how much they will prosper and how much you will save. To get the
savings figures, run an amortization schedule from a program like Quicken and give
it to them. Allow them time to think, since they may view you as a bad risk, since it was
your mishandling of money that got you into this mess. If you get the loan from them, as
soon as you pay off the high interest rate accounts, close them. I did and you cannot get
hooked in bondage when you stop the fountain of borrowed funds. Emergencies cannot be
avoided but once you know the proper steps of debt and money management, you will
establish a repayment plan in a controlled environment.
- ANALYZE YOUR AVAILABLE CREDIT LINES
- Not long ago I had the ability to charge $50,000 If I wanted to. I had taken the offers
from several banks and because of my AAA credit rating, I was given ridiculously high
credit lines. Of course I sent them back but I wanted to see how many cards I could
collect for an experiment. Keep in mind the following principle concerning available
credit lines. If you go to buy a car and they check your open lines of credit and see you
have the potential to charge $40,000 above and beyond the price of the car, they may be
hesitant to loan you the money. You may be considered a risk. Close accounts you have not
- Do you really need all those department store credit cards? Most of them are at 21%
or higher! Do
you really need a gold card plus 5 or 6 visas? You only need one not both. A $5,000 credit
line is sufficient to handle an emergency. Credit cards are not to be a means of living. Credit
Cards are a good servant but a fearful master.
- ESTABLISH A BUDGET
- This is one of the most critical steps to getting out of financial bondage and staying
out. Budget everything so there are no surprises. Let me give you some examples of what to
budget. Then I will give an illustration.
- Dentist - Do you go 1 or 2 times a year?
- Car and health insurance
- Start a savings account
- Cable TV
- General Fund - The GF allows you to know how much you may spend each pay period without
exceeding budget. This fund allows you to buy whatever you want because that is what it is
- Monthly Charges to be Paid - When you order something through the mail or purchase
something with a credit card, you automatically subtract that amount from General Fund and
transfer it into this category. So when the bill comes in, you have the money aside
- Gas usage, tolls for highways, car payments
- Debt repayment - Many people do not budget this item and as a result rob from Peter to
- House expenses, rent, mortgage, utilities, etc.
DO NOT DESPAIR AT LEAST NOW YOU HAVE A PLAN
CONTROLLED Vs. UNCONTROLLED DEBT
Previously I spoke of controlled debt Vs. uncontrolled debt. Here is the difference. An
example of controlled debt is a car. You purchase a car for $6000 and you put down $3000.
You finance $3000. When the bank or dealer finances that $3000, they include interest,
let's say $700, then they give you a monthly payment plan which includes both interest and
principal. Let's say $3700 is financed over 36 months. Your monthly payment is $103 and
will never increase because the finance charges are included in that payment. This is
called controlled debt. An example of uncontrolled debt is your credit card because the
only control is the credit limit and far too many people go into financial bondage before
they approach their credit limit which many times could be as high as $10,000 on one card
alone. When you make payments on your credit card, what you paid back automatically
becomes available for your use as debt again, thus allowing you to never pay down the debt
AND BE FREE.
THE NEGATION PRINCIPLE
During the time you are in debt and having the ability to save while you come out of
debt, you need to invoke a principle I call "The Negation Principle." What I
mean by this is simple. You are paying 15-18% interest on your credit cards but
simultaneously search for an investment vehicle that pays interest in nearly the same
amount. A good place to find high returns is in the Mutual Fund Market (though not
guaranteed). A point in fact is that the money you squandered in debt will never be
available to you, it is gone forever. You must start again. Let us say you have a
good financial advisor who gets you into a mutual fund that pays 16%. Now you are paying
off 18% debt but simultaneously receiving 16% on your money, you are negating some of your
losses, depending on how much you are able to invest. Remember previously I stated that I
purchased a cellular but simultaneously did away with my Caller ID and Three-way calling
which reduced my monthly bill. Use the negation principle for both investing and
NOW THAT I AM FREE - WHAT DO I DO?
Now that you have been freed from financial bondage, there are some things that you can
do to maintain a healthy financial picture so you will not be strapped by uncontrolled
- The key word is BUDGET. These are examples of what your budget should include.
You know what your steady expenses are and these must be budgeted. It will be hard at
first, but within 6-9 months you should be operating in a positive mode and your money
situation will be well under control. You may not be out of debt yet, but you will be on
the road to recovery.
- Open a checking account and create an index card system. On each card write the category
in which you are budgeting for along with the amount that you are budgeting. Let us set up
a hypothetical budget:
- Let us say your take home pay is $400 per week.
- Car Insurance
- General Fund
- Debt Repayment $ 80
- Pocket cash $38
- GETTING OUT OF DEBT - THE ROAD TO RECOVERY
- The road to get into debt is easy but the road out is arduous. The principle to keep in
mind is that it is attainable. It will take time to get out of debt but if you follow this
simple principle, you will pay off all your unnecessary debt without increasing the amount
of money to do it.
- Let us say you have 5 credit card bills with the minimum payment due as follows:
- Card 1 - Principal $ 4600 - Minimum Payment $ 81
- Card 2 - Principal $ 3800 - Minimum Payment $ 72
- Card 3 - Principal $ 2900 - Minimum Payment $ 61
- Card 4 - Principal $ 2100 - Minimum Payment $ 42
- Card 5 - Principal $ 1100 - Minimum Payment $ 26
- As you begin to tackle the amounts you owe you start with the smallest principal which
would be the $1100. The total for all 5 minimum payments is $282 which is your mandatory
amount you must pay each month. However. the payment for Card 5 should not be $26 but $52
which is a double payment. So now your total allotted amount for debt erasure is now $308.
For better understanding of this method of debt erasure, I am going to deal only with the
principal. The interest will be a part of the repayment which means it will take longer
than just dealing with the principal.
- When beginning to tackle the lowest amount, simultaneously you are also making the
minimum payment on the other bills, which continues to lower your indebtedness of both
interest and principal. Might I add a variation to this method. Let us say that card #2 is
at 21% while all the others are at 16%. If you choose you may start with card #2 instead
of card #5. Double the minimum payment of card #2 until it is paid off and then go on to
card #5. Paying down your highest interest rate first is an aggressive attack on your
- Card 1 - Principal $ 4600 - Minimum Payment $ 81
- Card 2 - Principal $ 3800 - Minimum Payment $ 72
- Card 3 - Principal $ 2900 - Minimum Payment $ 61
- Card 4 - Principal $ 2100 - Minimum Payment $ 42
- Card 5 - Principal $ 1100 - Minimum Payment $ 26
- Card 5 when making a double payment each month will erase the debt in 22 months. Keep in
mind that double payments have a tremendous advantage. The first $26 absorbs the interest
but the second $26 is fully applied to principal. This method is only applicable in a
situation of uncontrolled debt. Let's see what has happened in that 22 months.
- Card 1 - Principal reduced to $ 2818
- Card 2 - Principal reduced to $ 2216
- Card 3 - Principal reduced to $ 1558
- Card 4 - Principal reduced to $ 1176
- Card 5 - Debt erased (22 Months)
- In the past 22 months, your indebtedness was reduced by $6731. Now the $52 you paid Card
5, you now apply to card 4. This would make the monthly payment $94. Card 4 is paid off in
an additional 13 months.
- Card 1 - Principal reduced to $ 1765
- Card 2 - Principal reduced to $ 1280
- Card 3 - Principal reduced to $ 765
- Card 4 - Debt erased (13 months)
- In the past 13 months, your indebtedness was reduced by $3958. Now the $94 you were
paying to card 4 is now added to the $61 minimum payment of card 3. Your monthly payment
is now $155. Card 3 is now paid off in an additional 5 months.
- Card 1 - Principal reduced to $ 875
- Card 2 - Principal reduced to $ 488
- Card 3 - Debt erased (5 months)
- In the past 5 months your indebtedness was reduced by $2447. Now the $155 you paid to
card 3 is now added to the minimum payment of card 2. Your monthly payment is now $227.
Card 2 is paid off in 3 months.
- Card 1 - Principal reduced to $ 632
- Card 2 - Debt erased (3 months)
- In the past 3 months your indebtedness was reduced by $731. You now take the $227
payment you were making to card 2 and add it to the minimum payment $81 for card 1. It
will be a total of $308 and you will be out of debt two months later.
- Now before you rejoice that you are out of debt, let us look at the somber statistic we
have developed. It took you, under guided conditions, 45 months to come out of debt.
Please keep in mind that interest will be compounding during the time you are paying off
each bill and it will take longer to come out of financial bondage.
- Just think for those 45 months if you were paying yourself at the rate you were
paying your creditors, you would have in savings $13860. Just think if YOU were receiving
compound interest at the rate of 17-18% instead of the creditors. When all is said and
done, isn't unnecessary debt really foolish? Have you heard of rule of 72? You can
calculate how long it takes your money to double by dividing 72 by the interest rate. At
18% it takes 4 years for your money to double. At 6%, 12 years, at 4% 18 years, etc. Using
this rule and by going into debt at 18%, you lost $27720 in the 4 years it took you to
come out of debt. One more insult to injury, by you not collecting interest on the $27720
you paid your creditors at 18%, you would have had $55,440 instead of just beginning to
save. Now do you see the destructive nature of debt?
- Start paying yourself. The money you were putting to pay off your debt, now take that
and invest it. You work hard for your money, now let it work for you. Find an investment
counselor you trust and who recognizes good mutual funds. I have one and you still need
- Do price comparisons when you shop. Don't buy at the first place!
- Beware of impulse buying*
- Keep only 1 credit card and use it for emergency only. Close the accounts of the cards
you have never used.
- Tear up new offers for credit cards.
- If you have a regular card, don't upgrade to a Gold card.
- Change the oil in your car, it lengthens the life of it. When your engine dies, then
replace the engine, it is 75% cheaper than buying a new car.
- *If you are experiencing things like impulse buying, then leave your credit card
home when you shop. Avoid the malls and find a small business that sells what you need,
thus averting the possibility of going shopping. Many times small businesses are cheaper
because they do not have to pay exorbitant mall rents. Determine that you will not charge
anything under twenty dollars, gas included. If you must buy something, do it on your
lunch hour, thus cutting down the time available for impulse shopping.
- As you go along you will find and develop principles for financial soundness. Well, we
have a come a long way and let me end by saying that debt slavery had a grip on my life
for many years and this is why I want to help you avoid the pains that go with it. It
hurts when all your friends can afford to go on vacation or go away for weekends, and you
can't go because your debt has imprisoned you. The primary reason I authored this paper
was to help you back on the road to fiscal responsibility and freedom. We started with the
word "slave" and ended with the word 'freedom." I hope this is your
testimony. If this monograph has been helpful, please let me know!