By Jennifer Openshaw
http://www.fin24.co.za
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We all need to take some bad-tasting medicine for getting – and staying – out of debt. As the expression goes, when you’re in a hole, stop digging.

But it’s not as easy as it sounds. First, it takes an understanding of the problem and its causes. Then it takes some committed behaviour from you and family members to change.

Live below your means
Pretty basic – I know. Consume less than you produce. But it’s hard to believe how many ignore this common sense. For those who don’t know their “means”, or for that matter their spending “ends”, I suggest a budget.

Absolutely pay bills monthly
There may be some exceptions for those with irregular income, but for the rest of us, paying in full monthly is essential, and should be rewarded when achieved. I’ll talk about that in a minute.

Create an emergency reserve
Here’s another one you hear about all the time – create an emergency savings reserve. Most financial planners suggest a six month liquid savings to draw upon for emergencies and unexpected expenses.

But I can’t stress enough the importance of this reserve as a debt-avoidance strategy. The emergency reserve plays defense for you. Unexpected car repair? Medical expense? Science camp for your 12-year-old? Use the reserve instead of going into debt. Or, back to the metaphor, use loose surface dirt instead of digging a hole.

Use credit only with a plan
Contrary to what you might hear, you don’t have to avoid credit and debt entirely. Credit is OK as a purchasing tool to get a good deal on something you need or have budgeted for. If a new outdoor grill is in the plan for next summer and one is for sale at 30% off, go for it! But… only if part of a plan, not an impulse.

Get family commitments
The best-laid spending plans fail if you, and only you, are committed to them. Other family members must be in on the game too. That means being part of the planning process and part of making it happen.

Too many times I see one family financial “leader” making the plan solo for everyone else to follow. That gets in the way of shared understanding at best, and can bring resentment at worst. Remember the adage: “People who create tend to support.”

Reward results
People respond to rewards too. I’ve seen so many family situations where folks are expected to “do” financial discipline, only to be rewarded with nothing but more financial discipline for making it all work.

So my advice: create a reward structure. A family vacation, a lunch or dinner at a favourite place – or even just a nice card – as a reward for staying out of debt. Of course, the reward shouldn’t put you into debt!

Awareness, commitment, control
Now, on their own, each of these habits will help. But my advice is to implement them all together. The whole is greater than the sum of the parts.

According to Peter Sander, author of “The Pocket Idiot’s Guide to Living on a Budget” it’s all about awareness, commitment and control. It starts with awareness – being aware of your financial situation and what got you there. With awareness it’s easier to get commitment, and with commitment, it’s easier to get control.

It’s hard to beat the feeling of being debt-free. Get your financial habits in order, and that great feeling will make it all worthwhile. Promise.