First Person: Out With the Old Debt, in With the New Debt

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I was stuck in debt longer than I wanted to be. Looking back, I realize I was trying to go forward while being stuck in reverse. Going forward was my positive move to pay off my old debt. Being stuck in reverse was my terrible habit of putting new purchases on my credit card, thus acquiring new debt.

As I was paying down my Visa credit card, I was still using my Master Card to purchase that emergency mattress that my chiropractor recommended for my back.

I was so happy to have paid off my Best Buy credit card that I celebrated by opening a Victoria Secret card.

I've stayed out of debt for the past 10 years by following the cardinal rule of debt-free living: don't acquire new debt. I don't acquire new debt even if I'm offered interest-free payments.

Learning to live without credit

To get out of debt, I had to create a budget and use cash only. Using cash forced me to live below my means. Experts say it's more painful to part with cash. I found that to be the case. I took more time to consider purchases when dealing in cash instead of credit.

Paying off the credit card daily

I waited until I was debt free for two years before incorporating credit cards back in my life. Whenever I make a purchase on a credit card, I send a payment that same day to the credit card company through online banking. With this simple daily discipline, I have never had a problem keeping my account balance at zero by the end of the billing cycle.

Using myself as a bank

Instead of financing my car purchase and other major purchases, I saved for several years. Ten years ago, I decided to save $10,000 for a used car. I've increased my saving rate now so I'll have $20,000 set aside when it's time to purchase my next car. I rather borrow from myself as opposed to a bank so that I keep the interest payments.

Creating a safety net

I used to rationalize my dependence on credit cards because I thought I needed a safety net. I also liked the convenience. Maybe some people are smart enough not to fall into the credit card trap, but the facts didn't lie. I paid off my debt only to acquire new debt. I had to make a habit of saving 10 to 20 percent of my income so I could have a cash safety net or emergency fund.

Telling myself 'no'

In order to stay out of debt, I've had to learn to say 'no' to myself. I was talking to a friend today who has been trying to get out of debt for years. I asked if she planned to pay off a recent flat-screen television she purchased on a credit card. She said, "no," explaining that she has a zero percent interest rate. When I resist the temptation to charge things I want, but don't really need, I become wealthier. I still make purchases with money I've saved up, but I don't make nearly as many purchases as I used to make in my credit card days.

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