Why do some people incur great debt, while others manage their money without difficulty?

Question

What is the key to coming out of debt?

Answer 1

Spending much less than you earn. As simple as it sounds, it's what separates debtors from the debt-free. The debt-free have learned to spend less than they earn.

Answer 2

That's called effective money management.

Live within your means. Just because you have the line of credit or a credit card from your favorite bank that does not mean you are spending someone's else's money with absolute abandon. It's your money and be aware you are spending what you don't have. So, DON'T.

That's the secret.

Spend - even on your credit card - only on things you would buy if you had cash in your purse. Otherwise, do not use the card. Think very *very* carefully before handing that plastic to the cashier.

Those who use credit as a mere convenience and not as a free ticket get ahead. It is a no brainer. It is no rocket science.

You asked about coming out of debt. First, cut up all your cards and send it back to them and ask them to cancel your account. Then, spend only your cash until you pay off all your debts.

Answer 3

The big key to living without debt, is that you DO NOT SPEND as much or more than what you make!

This sounds simple, but most people do NOT have good examples of that while growing up, and the attitude "Want it now" is what prevails in their minds. Thus,they are ALWAYS in debt, and will never be able to get ahead in life or even be comfortable.

Answer 4

I too have been asking myself this very same question. Why do some people earn gobs of money, even though they are not extraordinarily intelligent, and others, who may be "smarter" are pinching pennies just to get by? I would like to share with you some things that I have learned while researching this topic.

A few weeks ago, I bought a book entitled The Richest Man in Babylon. This book is a classic finance book that was written decades ago. It is actually a collection of many stories based on the old biblical city of Babylon. This city was one of the most wealthy cities of all time. I mean, Babylon had people who were filthy rich. Using this city as his setting, the author penned story after story about wealth and finance, incorporating classic truths about money. These truths are timeless; they never, ever change. They worked back in the days of Babylon, and they can work today. Anyone, let me repeat ANYONE, can become rich. It has nothing to do with luck, family background, knowledge, or skill. Wealth comes by LEARNING these timeless principles and in turn, APPLYING them to your own life. I am going to share a few of these principles with you:

(1) Save at least 10% of what you earn. Put it away (preferably in a savings account) and forget about it. Let it grow and grow and grow. I know some people will say that they don't have enough money to make ends meet, so they can't save. You must examine your expenditures and see where your money is going. Is there anything that you can cut back on? How about that daily trip to McDonalds? How about those weekly movie rentals from Blockbuster? Little things like that, that are NOT necessary, really start to add up, and they drain your pocket of hard-earned money. A good suggestion is to immediately deduct the 10% (or more) out of your paycheck each week and deposit it in your savings account, or put it away somewhere where you know you won't touch it. I know if I don't do it right away, that money will get spent quickly on unnecessary junk.

(2)Put your money to work for you. You work hard to earn money, so why not make the money work for you? In the book I mentioned, the author advises to pretend that every "coin" (ie: dollar) is your slave. What can you do with that dollar to make it earn more money for you? And then as you begin to earn more, put that extra money to work for you, and so on. Don't let your money control you; YOU control the money. You tell it what to do.
It sounds weird, but it's true.
I could share more principles with you, but reading the book would really help you out. It's a small book so it won't take you long to read it, but it's truths could really CHANGE your life and the way you look at money. I hope that I have helped you in some way.

Answer 5

It's quite easy actually - simply live below your means. We live in a culture of conspicuous consumption. You are what you buy. Figure out your budget and live below it no matter how much your income may increase over time. For example, my husband and I make about $70K combined, not a huge amount, but we have no credit card debt, own both our cars (one new, one used), have a house, retirement accounts, a 6-month emergency cash account, and stock options. We figured out what our bare minimum was to live and anything we make above and beyond that gets saved in one respect or another. Typically we save 20-25 percent of our take-home pay a month. Yet, we still vacation in Greece and Hawaii (we set up a "vacation" savings account), tackle remodeling home projects, and splurge on things we both enjoy (ie, sushi and yoga classes). And then we meet people who make more than us, go out to eat 2-3x a week, buy compulsively, and yet have no savings to speak of and "complain" of not having any money to take vacations or buy big ticket items and they call us cheap. No wonder. It's a lifestyle and an attitude. If you make a limited amount of money like we do, then you have to make some financial sacrifices in order to achieve the larger issue of financial success.

Answer 6

People who handle debt responsibly usually had parents who set a good example and a school which taught them how. People who get themselves in too much debt did not have the above experiences.

Usually, people who get themselves into too much debt will do it over and over again. Some, however, take charge of their own lives and responsibilities and learn from the first time.

Set up a budget - know how much you earn and how much you can spend. Leave some room for the unexpected.

Answer 7

Education is the key. If the parents are spenders, then the kids will be spenders. If the parents created a budget, showed their kids where the money comes from and where it goes, give the kids allowances and let the kids save their money if they want to buy something, then the kids know the value of a dollar. It is up to the parents to teach their kids this.

Answer 8

If you own your home and have at least $10,000 in other debt NO MORE Mortgage may be able to help. They help with debt elimination. Including your mortgage. It doesn't hurt your credit, in fact, your credit will go up as a result of the program.
http://www.NoDebt4U.org

Answer 9

Common sense?

Answer 10

LIVE FAST.

OWE BIG.

DIE YOUNG.

MAKE A PRETTY CORPSE.

Anything else is meaningless.