FOOL SCHOOL
Get Out Of Debt

January 5, 2004

Most of us have phases where we spend money like water. It could just as easily be a good or bad week at work, your best friend getting married, a new baby in the family -- that sets you off on the slippery slope towards further penury. And it's often not until a month later, when the dreaded statement for your credit or store card drops on the mat, that the consequences of your spending spree hits home.

Actually, sometimes it doesn't even hit home -- particularly if you don't open the statements! And by then, of course, three pairs of brand new designer shoes have been consigned to the back of the cupboard because they pinch. Or you've decided you don't like that CD after all. Or that £500 suit. And you can't face the hassle of taking your purchases back to the shop!

But what happens if you lose your job? Get made redundant? Or get fired? It's that awful moment when you suddenly realise the true meaning of 'up the creek without a paddle'! Perhaps you don't even think you're actually 'in debt' anyway. Well, if you've got a loan of any kind, then you are! And the interest you are paying on those debts is money you've slogged your guts out to earn. It should be in your pocket, not that of a lender, don't you think? The only type of debt that is Foolish is mortgage debt because it's comparatively cheap and we wouldn't be able to afford to buy our homes otherwise.

If things seem pretty bad at the moment, here are three reasons to be cheerful:

• Don't panic! Newgate, the Victorian debtors' gaol, was closed about 100 years ago. You can't go to prison for being in debt (with one exception -- Crown debts -- but we needn't go into this here).
  
• Take control of the situation. OK, you've got yourself into a bit of debt, but it's not the end of the world. You're not the only one and you're not a leper! You've just miscalculated, that's all. The minute that you start taking responsibility again, you will start feeling better. Honest!
  
• If seriously in debt, then contact your creditors before they contact you. Believe it or not, they do not want to take court action unless it is absolutely necessary. But the problems will not only not go away if you ignore them -- they will most definitely get worse. Nothing annoys a creditor more than someone ducking and diving. If you know that you are getting into difficulties, talk to your creditors. Don't worry -- we'll show you how.

Don't ever forget that, in spite of the obstacles that constantly surface to make life just that bit more bloody difficult, money is not your Master. It is your Servant! If you can truly take on board that fact –- and it IS a fact -- you will suddenly discover that you are the 'controller' and not the 'controlled'.

Remember that people get into debt for any number of reasons. While there are some who have lots of money and are truly irresponsible with it -- Spend, Spend, Spend whenever they can - the cause is often the result of bog-standard things like a relationship break-down, the loss of a job, or a business going down the pan. The ensuing depression that sometimes accompanies such a dramatic change in circumstances can make it even more difficult to summon up the will or the energy to deal with it.

It's okay! It truly is okay! Life ain't always a bowl of cherries! C'est la vie! The trick is to face these things head-on and devise a method of dealing with them. Be the Master. Don't ignore the problem. The longer you delay, the longer it will take to sort out -- and the harder it will be to deal with.

More on getting out of debt.