Boyce Watkins: Work your way out of debt

By Boyce D. Watkins

Business Editor

June 29, 2007, 2:00 a.m. - Sometimes in medicine, the most dramatic procedures are best. You are in pain for a short period of time so as to end the long, persistent pain you’ve been feeling for years. So, please allow me, your personal Financial Physician, help you find a way to make the pain go away. I’m not a plastic surgeon, but as a Finance Professor, I’ve done surgery on the credit card plastic of millions of people just like you.

It’s called “Financial Liposuction”, and it’s a technique I created to help all of us who feel “financially chubby” and don’t know why. You have 150 pounds of student loans, 200 pounds of credit card debt, and perhaps even a deadbeat relative who continues to hold you back. You may not know why you overeat financially, but you are sick of it. You are ready for a positive, productive financial lifestyle that will lead you down the road to financial security, and you don’t care what it takes to get there.

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The Financial Liposuction procedure is painful, traumatic and invasive and therefore, not for the faint of spirit. But in the end, it can be the most rewarding decision you’ve ever made. You can find your way out of debt, and out of the grips of modern day slave masters, otherwise known as credit card companies. Most importantly, the head surgeon in the procedure is you. My job is to guide your hands during the procedure, to ensure you don’t remove a lung while aiming for the kidneys. Here are the steps you can take right now to get your financial life together. Remember: Your life is nothing more than a culmination of YOUR day-to-day choices. Make the right choices, and you are creating the right life, even if the steps are small.

Step 1: Find out why you engage in financial overeating in the first place. The reasons you overspend are between you and Dr. Phil, but some psychological house cleaning might be necessary. Filling a bucket does nothing if you never find the leak. Pay attention to your habits, documenting all of your spending for one week, or thinking about some of your worst financial choices. Make a decision right now to address these habits and improve upon them. The path to financial independence is a long one, and the first few miles of this road go through a town called “You”.
 
Step 2: Engage in financial anorexia for about 3 months – You spent so much money last month that your friends are calling you “Creflo Dollar Fifty”, now it's time to deny yourself a few things. Cut any excess fat from your budget, and consider even slicing at the bone. Pay necessary bills only, give yourself no credit card access, and keep a limited amount of cash in your pocket. You may even want to have your spouse put a WANTED poster of you in all major department stores for your own good. This part of the Financial Liposuction procedure gives you the chance to make dramatic changes in your lifestyle. They say that it takes 40 days to break a habit, so consider this day one.

Step 3: Get to slicing one of your favorite credit cards. You’ve been in an Ike and Tina relationship with this credit card for far too long. The card makes you feel good inside, and then it beats you down at the end of the month with a massive bill. It’s time for you to have the courage to walk away. Yes, you and this card have been through a lot together, and your “love” has created a lot of expensive financial babies (some of whom are 10 years old). But there are more loving credit cards out there. Once you are financially prepared for a new relationship, you can move forward. But for right now, you need to get this credit card out of your life for good.

Step 4: Figure out how much you owe and understand the terms. Some people deal with the chubbiness of financial debt by living in denial. Feeling they are too far gone to be helped, they just pretend that the debt doesn’t exist. You might think bill collectors are going to disappear just because you’ve stopped answering the phone, but that’s wrong. You’ve got to face the problem. Make a list of all your debts, determining the interest rates you are paying, and the amount of the monthly payment. Then, either approach a company about consolidating the loans under a lower interest rate, or simply start making higher payments, focusing first on the loan with the highest interest rate. It’s hard to know where you are going if you don’t fully understand where you are.

Step 5: Forgive yourself and look forward. You are human. Our most valuable lessons come from our most costly mistakes. You are not a bad person for making financial mistakes, all Americans make them (believe me, I’ve done the research on this). The question is: What are you going to do now? Get your back up off the wall and start becoming an active player in your own financial independence. A child is not going to learn if his parents do not actively shape his future. Like this child, your financial future is not going to have a healthy development without being nurtured through a series of good choices. Be smart, be strong, and don’t be afraid. This procedure is painful at first, but you’ll look and feel great in the end.

(Dr. Boyce Watkins is a finance professor at Syracuse University. He makes regular appearances in national media, including CNN, FOX and BET. He is also the author of Financial Lovemaking 101: Merging assets with your partner in ways that feel good. You can reach Dr. Watkins by going to www.boycewatkins.com).

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