Debting is an ancient art. Yet, as recently as the 19th century, those who couldn’t pay their bills on time were usually thrown into dark, cobweb-filled cellars known as debtors’ prisons. It was a sane option considering the alternatives – indentured servitude, disfigurement, or death. Talk about debt to die for. These days, penalties aren’t as brutal; however, the emotional toll of overwhelming debt can create a personal prison equally painful.

Consumer debt in the United States is more than $3.4 trillion, with credit card debt alone at a staggering $16,048 average per household.

Consumer debt has increased as jobs have decreased. Americans may be unemployed, but that doesn’t stop them from borrowing. Apparently, when unemployment gets tough, the tough go shopping. Personal savings have dropped to 0% of after-tax income even though the rate was more than 10% as recently as the 1970s. Not surprisingly, credit card delinquencies are on the rise.

Stairway to Heaven

If you want to buckle down the spending belt, experts agree on tried and true measures for viewing the light at the end of debt’s tunnel.

Step one: Just say no. The first step to a debt-free existence is to stop accruing more debt. Temptation is the devil’s playground. In order to resist a chronic descent into debtor’s Hades, you often have to cut up your cards.

Step two: Track your daily spending for 30 days and compare it to your income. If your expenses exceed your income, you’ll need to either cut back your spending or increase your earnings in order to get out of debt permanently. Once you have these numbers, you can develop a spending plan consistent with your cash flow.

Step three: Consolidate your debts into one account. Choose a low-interest credit card or, if you’re a homeowner, take out a home equity loan. Cutting your interest will enable you to pay off your principal more quickly. ASE Credit Union can help you find solid, safe ways to do this.

There are other, more risky ways to consolidate debt, but they’re not available to everyone. You can borrow against your life insurance policy’s cash value which you can then generally repay at a comfortable pace. Interest rates are usually below commercial ones.

As a last resort, you can borrow 50% of your 401(k) monies if your plan allows. But beware: There are three drawbacks. One, the loan must be paid back within five years; two, if you leave your job, the loan is payable immediately; and three, if you’re under age 59 1/2, there’s a 10% early withdrawal penalty.

Step four: Begin a savings plan. Even if it’s a small amount, it’s important to get into the habit. Replace your old pattern of getting deeper into debt with a new pattern of saving to prevent it.

It’s fine to want the better things in life. But, if you learn to live within your means, the happiness and peace of mind you’ll acquire will be worth more than all the debt in the world. You may discover that BMW can also mean Becoming Money Wise. The devil will no longer be able to “make you do it.”

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