February 25, 2009

Several years ago, I found myself in the unenviable position of being

newly divorced, paying off a mountain of credit card debt accrued

during the marriage, paying child support, and being the owner of a

losing business enterprise.

I was in the health care field, so I had

an income, but my debts were so massive that bankruptcy was not only a

viable option but was recommended by my attorney so that I could

"start fresh." All in all, I owed in excess of $75,000.00 in credit

card debt, $2000.00 a month in child support, mortgage payments on a

mobile home where I was living and the usual sundry living expenses.

My minimum consumer debt payments were in excess of $4,500.00 a month.

I had never considered myself a spendthrift, but these circumstances

forced me to take a hard look at myself, my standard of living and the

options available. I really did not wish to enter bankruptcy mainly as

a matter of pride, but I needed to be realistic. So, one might call this

story the guide for the newly single.

Regarding expenses, the single most important concept in curtailing

everything was embracing "do it yourself." I don't mean handyman type

issues -- I refer to all the aspects of daily life one takes for

granted, especially men. So, in a list fashion:

1. ISSUE: Food, Meals and Dining. SOLUTION: Buy groceries, and learn

how to cook. While this may seem obvious, aside from grilling, very

few men know how to cook foods from staples, or even cans. Rice,

beans, flour, corn meal, pasta -- all of these can be bought extremely

cheap, and if portions cooked are doubled, can be saved as left-overs.

Cooking the basic staples is a no brainer -- anyone can read the bag,

boil water and time the simmering (buy a $2.00 ding timer). It just

takes more time than heating an instant meal in a microwave, but costs

1/10 as much, but some need to be prepared overnight. Canned goods are

cheaper than frozen. Used cookbooks can be had for a couple of dollars

-- sometimes free at garage sales and flea markets. Not Julia Child but

ones like "one-dish meals" or "My first cookbook." Embarrassment needs

to take a back seat to learning. Daily take-out and restaurant meals

need to be substituted for brown-bag sandwiches and fruit. Simply

decline the offers at work to go out. Use refillable water bottles

from the tap and bring a Thermos for coffee -- it all adds up to

substantial savings. Ignore the comments (if any) and remember that

all of this adds to your debt repayment.

2. ISSUE: Dry Cleaning and Laundry. SOLUTION: Do your own laundry. Buy

soap, read a few articles and wash everything except white underwear

and towels in cold water. If you don't own a washer/dryer, get

quarters and go to a laundromat. Buy an iron and cheap ironing board

at a discount store, both for under $10 each. Buy spray starch and

experiment -- you will amaze yourself how fast you will get good at

getting nice crisp shirts. For suits that MUST be dry cleaned, do they

really need to be cleaned, or just pressed? IF they are not dirty,

just wrinkled and do not smell, the price of a pressing is much

cheaper than a full dry clean -- just ask for the service. Push your

case and they will agree to it. For house work, a cheap vacuum

cleaner, a bottle of all purpose cleaner and some rags will do you

fine for 90%. Get a toilet brush and use it for maintenance. Scouring

powder or Soft-Scrub for the hard areas.

3. ISSUE: Entertainment. SOLUTION: Stay at home and watch free TV,

Cable, or cheap $1.00 movie rentals (check the grocery store

offerings) or if you get a deal from NetFlicks. Go to the library, the

park or free concerts. If you are truly hard-up, this is the one area

where substantial savings can be realized, not only from not spending

retail for movies and going out, but the gas etc that gets you there.

Inevitably dating comes up -- try to find a sympathetic person who will

respect your plan or maybe needs some help themselves in cost

management. My current partner embraced these concepts from the

beginning after a frank talk and we are both completely out of debt

because of it, albeit some years later. And neither one of us missed

the dates at expensive restaurants or other venues, and simply enjoyed

each other's company.

4. ISSUE: Transportation. SOLUTION: Sell the expensive car if you can

and buy a reliable, used, gas-frugal vehicle. Many men place great

personal store by their cars but you just need to get over it (think

what a bankruptcy on your record will do to your ego.) Four wheels and

an engine is all you really need, if it is well maintained and costs

less.

5. ISSUE: Buying retail. SOLUTION: Cut coupons from the newspaper.

Look for sales and stock up when prices are cheap. Shop on

double-coupon days. Use the internet to find deals. Check on eBay,

flea markets and garage sales for staple appliances or other items but

buy only what you need. Use LISTS and try not to impulse-buy. Sign up

for email notices from grocery stores and discounters. Check out

www.retailmenot.com for online coupons for various online retailers --

frequently you can get free shipping or discounts up to 20% or more

just for looking. Use www.nextag.com to price compare new items at

various retailers. NEVER be afraid to haggle -- you never know when

they may say yes or get you more value for your money.

6. ISSUE: Existing monthly expenses. SOLUTION: Find all ongoing

expenses and try to cut them out. Do you REALLY need all those

magazine subscriptions? Do you have ALL the premium cable channels or

can you do with one (or none & watch free cable?) Do you actually use

that gym membership daily or is there a YMCA near you? Do you belong

to music clubs, XXX of the month or other unnecessary recurring

expenses? Cut them out, go to the library, sign up for free blogs or

e-newsletters, look for free alternatives.

7. ISSUE: Debt Management. SOLUTION: Pay off your lowest balance items

first. I certainly will not try to take credit for this concept as I

have seen versions of it for the last 20 years, but I have to admit

that it does work if you discipline yourself. The biggest hurdle to

getting started is usually the overwhelming sense of the "bottomless

pit" mentality -- the sense that you will never dig yourself out.

Getting rewarded by being able to eliminate one payment every so often

is a powerful motivator and kept me going. The way to start is to get

a copy of Quicken or Money (now they have free online versions at

Mint.com etc) and enter ALL your finances, no matter how mundane.

Categorize EVERYTHING, including what is spent as cash (be prepared to

get shocked over what you REALLY spend for fast food or other

unnecessary expenses.) Use the software to create a monthly budget and

stick to it no matter what -- if you run out of money for a specific

category in a particular month, don't borrow from another but do

without if you can until the next month.

Don't forget to budget for

quarterly or yearly payments such as taxes or insurance. Also budget

for contingencies such as repairs and emergencies.

NOW, after all the

money is budgeted go to your debt-repayment budget category. Get all

your accounts and pay the absolute minimums on all of them except for

the one with the smallest balance. On THAT account pay ALL of the

money you have left in the debt-repay budget. Continue to do this

every month until the account is paid off. Then never use it again. Go

celebrate that one of the accounts is paid off and treat yourself to

an extra movie or so. The next month, take all of the money that was

being paid to the paid-off account and pay it against the second

lowest balance account along with the minimum payment you were already

making. Continue this process until all the accounts are paid down. If

you get raises, bonuses or a tax refund, put the money toward the debt

to accelerate the process even further.

There are some that recommend paying off the highest interest items

first. This is certainly an option, and may mathematically work out

better in the long run, but I simply cannot overstate the absolute joy

it gives you to be able to say "I did it! I'm DONE with sending them

any more money!" The sooner you get to do this the sooner the much

needed reinforcement happens and will keep you on your mission. This

is easier to achieve with paying off a smaller balance account first.

Another issue (which some told me I was crazy to do) was even when I

was so deep in debt, I subscribed to an automatic savings policy where

I had money deducted from my paycheck BEFORE I could get to it and

deposited in a money market fund that was hard to access easily. It

was not much, but it really helped me psychologically to see that

small account increasing every month and even earning interest on it.

I felt that despite my crushing debt I was able to show something for

all my hard work that was mine alone. And when I had paid off all my

cards, all the money I had been paying towards debt went straight into

savings, which now is a substantial amount.

Finally, unique to this era versus the past is that credit card

companies will cancel a card if you let it go dormant (don't use it

for a while) -- this will affect your credit score. So every quarter,

use each card at least once (say for the groceries) and pay it all off

at the end of the month. That way the accounts will remain current but

with zero balances.

The above steps if followed will ultimately get you debt-free without

having to declare bankruptcy. The deeper issue is do you have the

mental fortitude NOT to get back into the habits that got you there in

the first place? If you have a spendthrift partner, can you deal with

taking the cards away and giving them an allowance? Can you handle the

whining kids demanding the latest and greatest electronic gadget and

you saying no? If you doubt yourself and honestly your partner is

stronger, then you have to let your ego go and let the more

responsible partner handle things.