Thursday, July 8, 2010

Be Careful About Saying "What's Another $1,000?"

Tip #264 - Be Careful About Saying, "What's another $1,000?" I know there are many people out there drowning in debt. Not including a house mortgage, I have read many people's stories about owing others $20,000, $40,000, $70,000, or even over $100,000. This might be a combination of student loans, medical debt, credit card debt, and car loans. And when one has $65,000 in loans, it is very tempting to say, "What's another $1,000? Let's go buy that large screen television."

Please, please, please don't think this way. Another $1,000 is another $1,000. And while it may seem like a drop in the bucket when you owe $50,000 or more. It's not - it's $1000 plus interest over time. When you seem like you are drowning in debt, don't keep adding to your debt because you think it's just another small drop in the bucket. Instead, work out a plan to attack the debt that you already have.

On the positive side, I've also read many stories where people have said they have paid off $35,000 in debt in two years or $70,000 debt in five years. So it can be done. Instead of adding to your debt because the amount seems insurmountable anyway, make a plan to get out of debt. Write up a financial plan for the next five years, create a budget, find ways to reduce your expenses and/or increase your income, and start paying that debt down. Every dollar of debt does count. Even if the number seems extremely high and too much to conquer, do not feel helpless and keep adding to that debt. It will only make the number that much higher when you decide enough debt is enough. So take wherever you are at today and start to tackle it. Don't throw in the towel.

In Real Life (IRL) - Several years ago I went to see a well-known designer, Michael Payne from HGTV, give a talk at a Home Show. As he was telling us about remodeling, he said the four most dangerous words when doing a room or house remodel are "While we're at it..." The audience had a giggle about that, but this phrase has always stuck with me. When redoing a room or a house for tens or hundreds of thousands of dollars, it's easy to say, "While we're at it, let's do the bathroom for another $10,000: or "Let's add a deck for $15,000," because after all, if you are already spending $100,000 on a remodel what's another $15,000? Well, it's another $15,000, that's what it is - not too different from ther person who feels overwhelmed with his debt so he keeps on spending. It's a very dangerous place to be.

I have a friend whose husband is out of work. This family has always lived pretty well - and I suspect above their means. So when the husband lost his job, I thought they would finally cut back on their spending. Instead, I see no change in their lifestyle. They recently confided in me that they spent $3,000 to send their son to summer camp. I was aghast - literally. After all, who spends that kind of money when they clearly do not have it? And that's when the idea for this post occured to me. I suspect that they have so much debt that another $3,000 just doesn't seem to mean much to them anymore. After all, what is $3,000 when they maybe owe $60,000 or even $150,000? I can't say much to her; I have tried. The best I can do is be an example.

My husband is not even out of a job, but as I mentioned in an earlier post he was told that his office will be closing in about 18 months. And because of that, I have already cut back. I cut out a $125 camp that I didn't feel was necessary this summer. And I have continued to show my friend the benefits of thrift store shopping. But she doesn't catch on or isn't interested. So I keep my mouth shut. And instead I write on here anonymously so maybe others can build up their financial knowledge and make wise choices with their money. And while you're at some money up, as well. For other ideas on saving money, check out Frugal Friday.


Mara said...

Yes, this is SO true!! I totally get caught up in that "it's only $10" mentality. This is such a good reminder for me.

Penniless Parenting said...

Ugh, I get so annoyed at people who not only say "What's another 10 dollars?" but they also chide ME for trying to save that. Maybe some people have lots of extra money, but for me, an extra 75 dollars is another month's worth of groceries for us, so yes, the little bits add up.

ann said...

'Drop by drop you make an ocean.' So true! Whether its saving money or spending, EVERY drop matters. Thanks for such an encouraging article. :)

shopannies said...

we must think about the way we spend money as a couple me and my hubby has decided to discuss money before spending it

freedom journey said...

Oh how I wish I understood this five years ago. I had just signed up for my first credit card and was preparing to go to a friends wedding. I distinctly remember saying, "oh, what's another $200, I'll just pay it off next month." Then when I got married in the stress of wedding planning we both said exactly, "oh, what's another thousand dollars." Sigh...we know now what it is! It's just like you said...that money plus the interest!! Oh that awful interest. We don't charge anything anymore, and certainly don't say "what's another..." I hope you have some wise readers who can take your advice at face value without feeling compelled to learn this lesson the hard, painful, awful way themselves.

Debbie said...

I saw this with a lot of friends who were getting married. They spent upwards of $40,000 on a wedding - and I'm sure a lot of that was due to this kind of thinking - "What's another $1,000?" My husband is working with someone who overspent so much on his wedding that he had to live with his in-laws for five years afterwards to pay off the debt.

Anonymous said...

Don't try to change your friends way of thinking.. They have to learn the hard way.. and some never do.. We have friends that have moved because of job loss over 7 times in their 12 year marriage. They have always been lucky with selling houses they buy, but last fall it caught up with them and they got forclosed on. You think they would learn? no at Christmas last year they were bragging about the new 42"tv and X box Wii systems they got..