Bottom Line
What you keep
No better time than the present
Taking immediate steps to formulate a plan can have you seeing a debt-free life ahead of you

By Steve Freidell
Land Line contributor


Are you guilty of driving down the road with a windshield so dirty with grime and bugs that it’s difficult to see out of? Do you think to yourself, “Maybe I will clean my window at the next truck stop” but in your haste to deliver on time, you keep driving?

Well, this is exactly the same mentality a lot of people have when it comes to dealing with debt. You put off today what you can always do tomorrow. It takes time and effort to wipe away all that dirt. It’s much easier to allow it to accumulate, even though it’s hindering your view and ultimately making it just a little bit more dangerous to drive down that road.

Recently, I saw the release by the federal government of consumer borrowings, and they have declined for the sixth straight quarter. In the past year, consumer credit declined 3.7 percent. That may not mean much to you, but when you look at the previous five years average history of consumer credit expanding by 4.3 percent, that is a significant decline of $95.4 billion.

Now I hear you already saying: “So what. How does that help me?” I think this only reinforces that debt reduction is the new national obsession. No longer is it desirable to have a new car, a new house or fancy vacations if these things have to be paid for with credit. People understand that a lower-debt lifestyle has distinct advantages, and that desire is catching on quickly.

Do you have the dream of cutting up your credit cards forever? Do you envision the day you no longer have a mortgage? Can you see yourself someday being able to pay cash for anything and everything? Of course you do, but the days are gone for borrowing beyond your means. Banks are just not going to allow that anymore. Furthermore, the ability to manage one’s credit is becoming more and more a reflection of one’s character.

It’s still the first part of the year. Are you taking all the steps we have discussed in previous articles to cut your budget and reduce your debts? If not, go back and reread some of the advice. It all starts with a plan.

Let’s look at one thing you can do today. Shortly it will be time to file your tax return. With declining incomes this year, most people will have the opportunity to receive a tax refund. What will you do with your refund? Will you spend it or save it? I would suggest one other consideration: Pay down some debt.

We all use our tax refunds as a quasi savings account, right? Well you need to change that approach. If all you do each year is work hard and then blow your refund on the latest impulse, how will you ever get control of your debts? Would it not feel better each year to use that money to help pay down bills and get in the fast lane toward your ultimate goal of getting out of debt permanently?

Don’t just assume that you will eventually work yourself out of debt somehow, someday. Make a plan and start today. In the meantime, apply this year’s refund to your credit card bills and pay off the highest card with the highest interest rate first. Next, readjust your W-2 to reduce your amount being held and apply that amount each payday to reducing your debt.

By taking all these steps, you will be amazed how quickly that debt disappears in your rearview mirror. You will begin to see the road ahead with greater clarity than you have ever imagined. LL

This material has been prepared for informational purposes only; it is not intended to provide and should not be relied upon for accounting, legal or tax advice.

Steve Freidell has assisted clients in their cash management, trading, and portfolio management of fixed income securities since 1975. Steve started his career at the First National Bank of Kansas City and later served as first vice president with Commerce Bank, where he served his clients for 25 years. He joined the DeWaay organization in 2006, the financial management company utilized by OOIDA. Steve Freidell may be reached at