You Just Realized You’re Spending More Than You Earn: 4 Things To Do Today

My financial turnaround began when I realized I was spending more than I earned each and every month. That’s pretty much the only way you can pile up more than $25,000 of credit card debt in a year (that’s about the rate I was going). For me, it came down to stupidity and lack of attention really.

If that sounds like you right now, here are four things you can do TODAY to stop the bleeding and begin to gain control of your financial life.

Stop using credit cards – Those little plastic jerks are ruining your life and you know it. Chop ’em up! They aren’t cool, you don’t NEED them, and what good have they done for you so far? Life is possible without credit cards. I haven’t had one for more than a year now and I never miss them.

Make a budget – Honestly, making a budget is like getting a raise. It’s amazing what a little detail work can do for your finances. It’s hard work though. It takes time and practice to successfully budget. Don’t give up after your first try and don’t expect to get it right in the beginning. Just trust that it will work and give it a chance. This step alone will dramatically change your financial life.

Sell some of the stuff you bought that you knew couldn’t afford anyway – Video games, DVDs, golf clubs, whatever unnecessary junk you bought that you don’t need. Face it, almost nothing that we buy is truly a NEED. Be ruthless. Start listing some stuff on Craigslist or Ebay. It can be a pain, but consider the hassle to be part of your therapy. This will put some cash in your pocket quickly and give you some small victories on the road to turning your cash flow positive again.

Create more income – This could be overtime at your current job, finding a part-time job, or my personal favorite- finding some freelance work of some kind. Anything that allows you to use your existing skills to provide a valuable service for someone is your best bet for some quick side money. This is the best choice because you’ll start to get a taste of how to create your own path to income in your life.

These are just a few tips and there is more you can do, but you have to start somewhere and this is as good a start as any. You need to dedicate extra time to working right now, but don’t neglect education. Read some blogs, and read some books. Start talking to your friends and see if any of them are trying to change their financial lives too (you might be surprised, this is more common than you probably think). Try listening to the free Dave Ramsey Show podcast (or his radio show if it’s on in your area). The podcast is only 40 minutes long, it’s free, and it’s a great way to get a daily boost of inspiration and keep fighting the battle with debt.

Even if you can only do one thing today, it’s a start (if I had to pick one, I’d start with budgeting). The most important part is realizing there is a problem and starting to take action as soon as possible. Once you get the ball rolling, this will get easier. Good luck!

Looking Back on a Year Without Credit Cards

I started this blog in September, 2007 with about $25,000 in credit card debt. As I write today, I’m down to about $10,000 remaining. I did not add any new credit card debt and I focused my efforts on paying extra on my credit cards before any other debts. Along the way, I have paid for some car repairs, dental emergencies, and two new computers. All with cash of course!

So how did I, a credit-card-crazed-consumer who had spent $25,000 beyond my means, make such a great change?

You may think you can’t get through life without credit cards—I admit that it was a little scary and difficult at first, but it is entirely possible. I’ve stayed in hotels and rented cars without credit cards. I’ve booked airline flights and handled unexpected car repairs. All you need is a debit card and actual money and you’ll be just fine.

Credit cards are tightly woven into the typical American lifestyle these days. Surely the banks would like us to believe they are necessary judging by the advertisements they flood us with. However, thanks to the current financial crisis, some of us are finally starting to wake up and realize that our current path will only lead to failure.

I’m writing to you as a normal guy who was once part of the credit-card-crazed, consumerist culture. If I can break free, you can too.

Don’t let the media fool you into thinking you need credit cards and don’t think it’s normal to spend money you don’t have. At least give the credit-card-free life a try—you can always go back to living in debt if you find you miss the feeling. 🙂

*In the interest of full disclosure, I currently have 2 active credit card accounts (the two remaining cards I am paying off) and I have 1 physical card in my possession. I don’t carry it with me and I haven’t used it for more than a year now, but it is at home and available if I every truly ‘need’ it. I plan to get rid of it as soon as I have a fully-funded emergency fund (6 – 12 months of expenses).