About a year ago, Tom filed for personal bankruptcy. Of course, that notification hit the local paper in the little town he lived in. Six months later, Tom had a heart attack and died in his sleep. He was not yet 65, and appeared to be in good physical health.
For many, debt is not the real problem, but rather a symptom of a much larger problem: an addiction to a self-image and a way of life. Until you address the real problem, you cannot solve the symptom—debt.
While I am not a psychiatrist, I can pick out common traits from among those who walked the walk—retired friends who have accumulated wealth and enjoy retirement on their own terms. Perhaps it is not as lavish as they once hoped, but they enjoy the absolute freedom of being debt- and stress-free. Here are 6 tips I have learned along the way.
1)Start with a financial checkup.
I have written many times about the epiphany many of us experienced when we first sat down with a financial adviser to look at our fuzzy retirement goals. It can be just the dose of reality needed to change our behavior.
2) Set real, measurable financial goals.
As we get closer to retirement, it is no longer some vague event that we hope will happen in a decade or so. Set firm, measurable short- and long-term financial goals.
3) Build a workable plan.
Achieving those milestones along the way is exhilarating—almost like a preview of what being debt-free is all about. If you just keep doing what you are doing and stick to your plan, you will make it.
4) Both spouses have to be totally committed.
This was another major difference I saw between Joe and Tom. Joe’s wife was a country girl whose real values in life are family and friends. Tom did not have that kind of support. He had remarried a younger woman who thought she was marrying a big shot. I guess she just married him “for better” because, when it became evident their lifestyle was an illusion, she left him.
5) Realize you are not alone.
As a member of Lending Club, every day I see hundreds of loan applications from people with great incomes who want to consolidate and get out of debt. It sounds funny borrowing money to get out of debt, but they want to consolidate and reduce their interest rates, which is part of the process. Many of these people are doctors and lawyers making huge amounts of money. Not only do they need to make the payments to reduce their debt; they also have to curtail their spending at the same time, something Tom was emotionally unable to do.
Since 2008, when the interest rates on CDs and fixed income securities dropped to the point of not keeping up with true inflation, even folks who have managed to accumulate some wealth have had to make some tough choices when it comes to priorities. We have many friends who have owned a lot of luxury cars who are quite proud to drive up in their new Toyota and discuss how much they saved along the way.
6) There is no shame in adjusting your lifestyle to the current environment.
Simply put, you have to do what you have to do! While it may have been nice to feel rich during the boom times, adjusting your lifestyle and spending patterns to avoid being poor is not shameful; quite the contrary, it is prudent. Many couples tell us how they worked together and the process made their marriage even stronger. Shame? No way! Pride is much more accurate.
Once your goal is true, stress-free financial independence, it is worth giving up a lot of stuff. Unfortunately for Tom, he was such an addict he could never make the transition. Joe and his wife are happy, surrounded by loving family, and enjoy seeing their next generation grow and mature.
Being debt-free is a major step. You are halfway home. The next step is accumulating wealth. Instead of making payments to creditors, now you can start making those payments to yourself and prepare for the future.
There are many ways to avoid Tom’s fate if you get started right away. We’ve prepared a free special report that will help you take a critical look at your personal budget and categorize it to make it easier to cut out unnecessary expenses. It also provides some insight into ways to get started on improving the income side of your ledger. Click here to access this free report and get started on your path to more savings and income today.