Making sacrifices to get out of debt (part 6)

Ok, if you have made it this far in the series, you are doing great. But this one is where the rubber meets the road. This is where we see how bad you want to be out of debt.

The sacrifice is only temporary!

The most important thing to remember as you are reading this is that it is ONLY TEMPORARY. By making a sacrifice you are not condemning yourself to that for the rest of your life. You just need to make up for all the overspending that has taken place in the past

If you have done some of the things mentioned in the last few articles, you are on a better financial footing than you were. But, if you expenses are still greater than your income, then we are going to have to take a few more steps.

Sacrifice your stuff and sell it!

Like we mentioned before, your balance sheet is the true indication of whether or not you are progressing financially. But, if your expenses are greater than your income, it is highly unlikely that you are increasing your net worth. So, in order to move forward you either have to cut expenses or increase income.

So far we have mostly been focusing on the less painful ways of cutting expenses in order to increase our net worth. Depending on how deep in debt you are, you may need to take drastic measures to get yourself back on solid ground.

What do you have that you owe money on?

Take out a piece of paper and write them down. Do you have loans on your house, car, boat, living room set, or anything else? The goal is to minimize our expenses, so what better way than getting rid of some of the stuff we owe on? Don’t worry, you will be able to get it again later, but now your goal is to break free from the bondage of debt!

Remember when I said you have to open your mind to things that you might not have wanted to do. This is probably one of them.

Cars are terrible investments!

We pay a lot of money for them and they basically only go down in value until they to car heaven. In my opinion cars get people into financial trouble more than anything else. Most people don’t spend tens of thousands of dollars on something that knowingly goes down in value.

The way to defeat this of course is to drive older cars (older cars have already suffered much of the depreciation and therefore lose a whole lot less in value each year).

What is good about this is that if you have a car that you paid $25,000 for and it is now worth $17,000 you can sell it, take the $17,000 and use $6,000 to buy an old car and use the remaining $11,000 to pay down your debt. Just think about this for a second. You can knock out $11,000 of debt just by making one sacrifice: driving an older car.

Now I know not everyone is in that situation, but the principle still applies. So, if you have a boat that you owe thousands on still, or a couple cars, it doesn’t really matter. If you are making payments on it, you should consider getting rid of it.

And come to think of it, if you do own it and it is still worth a decent amount, you can sell that too!

But if I get an older car, it will be expensive to maintain.

Not necessarily. Go to Consumer Reports and give them $5.95 for one month of access to their website. They have, hands down, the best and most useful information for buying a used car. The rate just about every car in the book for all kinds of criteria. Not the least of which is reliability.

What you will find is that Honda and Toyota (on average) make the most reliable cars. If you were looking for the single best old car that is reliable, I would say it would probably be a Civic. But, do your own homework at Consumer Reports.