Exhibit A: Guy with credit card debt
We’ve all been there and it’s no fun. Whether to pay a minimum on our credit card bill or pay back a friend, there’s a certain resistance that each of us feel when parting with our money. What’s worst though is the lack of feeling we have when spending it! Each of us have dreams and aspirations, but most of us are held back because we think our jobs and lives are limiting us. They’re not, but our debts and bad decisions are.
One of the things Prophet Muhammad would ask Gods protection from was the “yoke of debt.” Owing debt is like a yoke on your neck, a collar pulling you back and inhibiting your freedom. See Exhibit A.
Through better money management you can not only avoid parting with your cash and also avoid the hardship that comes with paying back more than necessary. A massive bill each month snowballing and hurdling towards your livelihood will wreck havoc on your future. It has to be slowed down first if not halted from the outset.
Here are three things you can do immediately to lower your debt and start on a path to financial freedom:
1- Cut the strings to (not actually) free money
If you have several credit cards right now, but aren’t using them, identify the ones that have the best rewards and will give you a better return on their use. Then cancel all your other cards. Once you’ve paid down your credit card debt, and you longer need that card, get rid of that one too.
If you still need a card for certain purchases, keep it at home with your bills and important papers, but don’t carry it with you. “Out of sight out of mind” is the key here. The less access you have to (not actually) free money, the less often you are going to use it.
2- Review your expenses and reallocate them to something better
Have a monthly subscription that you don’t really use? Maybe a reoccurring expense that’s not too essential (expensive as heck coffee comes to mind)? Don’t just cancel that subscription. You obviously did not miss that money too much. Instead of saying “Hey now I have an extra 50$ a month!” Take that extra cash and setup an automatic money transfer to your bill pay account.
Look at your daily expenses. If you drive to work and pay for parking, instead of paying 10$ a day for a garage right next to your job, pay 5$ for the lot down the street and walk a few blocks to work. 5$ of savings a day for 20 a month is 100$ a month!
Whether from coffee, subscriptions, or parking, apply that amount immediately to paying down your outstanding debts. You won’t miss it, and be better off for in health (less sugar, more exercise) and in wealth (less debt, more earning).
3- Be your own bank or Credit Card (actual free money)
Every six months, take 1% of your income and stick it in an emergency fund. Whether you take it out as cash and leave it in a safe at home, put it in an IRA, or place it in an online savings account that isn’t connected to your main bank account (remember “out of sight out of mind”) you’ll start to accumulate a surplus that you can use in lieu of your credit card when you need to make a major purchase.
Say your salary is 55k a year. Every six months put 1% away. That’s 550$, equaling 1100$ a year. That’s big enough to make a difference without making a dent in your wallet. By year end you’ll have 1100 dollars saved. Around 3$ a day (see coffee above). In three years that’s 3300k, enough to purchase new tires for both cars, buy a new home appliance, or take that anniversary trip you were planning. Its free money, because its yours to use freely without worrying about paying someone else back for it.
When do I start?
The best time to plant a tree was twenty years ago, the second best time is today. Read this prayer “Lord I seek your refuge from the yoke of debt and being controlled by others” and then crack open your books to see just how you can put that supplication into practice. Take a few minutes to put these steps into action and turn your prayers into practical steps and your dreams into reality.