E Stands for Eliminate

SIMPLE Personal Finance Series

E stands for EliminatING dEBT and costly expenses

While you may think you will need a magic trick to make your debt disappear, you have four basic options at your disposal:

  1. Repay your debt on your own directly to your creditor(s)

  2. Take advantage of a debt management program through a nonprofit credit counseling agency

  3. Negotiate or settle the debt for less-than-full-balance with the creditor

  4. File for bankruptcy

Starring Christian Bale, Hugh Jackman, and Michael Cane, the 2006 movie, “The Prestige,” explores the dark side of a magician’s commitment to his or her art. Without getting into the twisting, surprising and sometimes even gruesome plot, suffice to say that each of the starring magicians spend their energies and their lives trying to make things disappear in a more unbelievable and dramatic fashion than the other. Michael Cane’s character describes three components of a magic trick. I acknowledge that this terminology was invented just for this movie, but it applies perfectly to the subject of debt elimination.

First, with the “Pledge,” the magician introduces the audience to an object or situation accepted as unremarkable or generally normal.

Second, with the “Turn,” the magician makes the audience believe that the object has disappeared or dramatically altered in some impossible way. The Turn may take only an instant or it may last the entire show.


Finally, the last step of the trick is to bring the object back to its original or to an improved (but always recognizable) state. Cane’s character calls this step the “Prestige.”

When managing your household finances, it can certainly feel like you need more than a mere Pledge to eliminate your debt and Turn it into savings and investments of some Prestige. You might personally feel that you have to become a magician and obtain some secret knowledge to succeed.

The reality is that you start by changing how you see yourself. Are you audience member watching others do tricks with money, or are you becoming the magician on your own financial stage? Consider what your financial tricks might involve.

The Pledge

You get to determine the object you want to eliminate (make disappear) from your finances. Two common choices include unnecessary spending and plain ol’ debt.

As part of the Pledge, a financial magician will the audience verify the object is genuine. That is far too easily done where consumer debt is concerned. You simply log on to your account or call your lender to confirm the debt’s current status, its balance, and possibly the payoff amount. The trick will be to make the debt disappear, like magic.

The Turn

Like in a magic show, making the debt disappear appears to be the most difficult task. This is the Turn. Making debt disappear might appear like magic to those who think you have to win the lottery or inherit a fortune to get rid of debt, but it is not a trick. Such beliefs are akin to fairy-tales, though.

If you think that paying off debt is dependent upon earning or receiving more money, you will NEVER be out of debt.

If you think that paying off debt is dependent upon earning or receiving more money, you will NEVER be out of debt. Human nature has a few tricks of its own up its sleeve. You see, the reality for most consumers is that the more money we make, the more money we must spend. By nature, we become willing dupes in this show.

You can make debt disappear in one or more of just four ways, none of which involve magic. Each of these four method has its advantages and disadvantages. Start with option number one. If that does not work for you, consider using method number two. If method number two does not fit your situation, research number three, but because. If you choose not to pursue method number three, method four will be your final option.

  1. Eliminate your debt on your own by paying at least the minimum amount due. Paying more than the minimum due will always save you in interest over time. You might also consider contacting your creditor(s) to lower your interest rate. The lower your interest rate, the lower your monthly payment and the faster you can make the debt disappear.

  2. Eliminate your debt with the help of a nonprofit credit counseling agency like Money Fit by DRS to consolidate your payments, pay off your debts at lower interest rates, and become debt free in five years or less with no lasting notation on your credit report you were ever on such a program. Debt management programs typically have a low enrollment fee and reasonable monthly fees regulated and capped by each state.

  3. Eliminate your debt by negotiating with your creditors to pay less than the full balance you owe. There are third-party companies that will offer to do this for you, but they can charge hefty fees, and the chances of you being sued and having your wages garnished can be higher than your chances of succeeding with this option.

  4. Eliminate your debt filing for bankruptcy. While about 20% of filers do so with an attorney, you should at least consult with an attorney about how he or she can help you through the process. Yes, attorneys charge from $1,000 to $3,000 or more, depending upon the complexity of your finances, but they can also help you avoid mistakes that will cost you tens or even hundreds of thousands of dollars down the road. Find an attorney that specializes in bankruptcy law.


The Prestige

Would you want to make your debts disappear only to have them reappear exactly as before after working so hard to get rid of them? Of course not. Unfortunately, many consumers do exact this. Consider people who pay off their car loan only to turn around and make it reappear as another new car loan. Other households finally pay off a vacation credit card bill only to turn around to put another vacation on their credit card. As magic tricks, these scenarios offer only continued disappointment and frustration.

Instead, for a great financial trick, make the money you were spending on all of that debt reappear in new and improved forms, including home ownership, a retirement nest egg, greater cash flow for future travel and other experiences, as well as a growing emergency fund that promotes greater peace of mind and healthier sleep habits.

Now that’s a trick worth learning!

Three Keys to a Successful Financial Magic Trick

Here are the three keys to performing such a successful financial magic trick:

  1. First, you must be willing to suspend the twin beliefs that you will always be in debt and that debt is a normal part of your life. Instead, picture yourself, five to ten years in the future, enjoying life without any debt at all. Ask your current self how different your future will feel. You have to buy into the idea that such a magical event and such magical feelings can truly happen. Otherwise, you will remain in debt – and probably even increase your debt – year after year for the rest of your life.

  2. Next, eliminate unnecessary spending. Spending mindLESSly grows your debt. Spending mindFULLy grows your financial satisfaction (and likely your net worth), like magic. Therefore, you must have a spending plan (aka a budget). No magician approaches a new trick without a plan. If you have tried unsuccessfully to budget before, perhaps you need a different plan. Go back to S Stands for Spend to review a few options available for your spending plan.

  3. Practice, practice, practice. Every good magician (and every successfully household financial manager) knows that a great magic trick requires repeated effort, regular adjustments, and a consistent belief in your eventual success.

Armed with these three keys and an understanding of the steps in all great financial magic tricks, you are now ready to perform what has previously seemed miraculous: make your debt disappear. Are you ready to get started? It is time for your Pledge.

Click here to commit to becoming debt free and to receive quarterly tips and resources for achieving your debt elimination goal.

Then, share your commitment to becoming debt free with your close family or friends. You can even share this page on your social media accounts to show how committed you are to living debt free.

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S stands for Spend
I stands for Invest
M stands for Management
P stands for Plan
L stands for Limit
E stands for Eliminate