Reduce Stress by Reducing Your Debts

Dear Elaine St. James: I read your book “Simplify Your Life,” and I must say I take exception to suggestions No. 38, Get Out of Debt (is it really that simple?); No. 47, Pay Off Your Mortgage (mine is presently at $195,000); and No. 39, Live on Half of What You Earn and Save the Other Half (is that net or gross?). In my opinion, this advice is irresponsible and unrealistic.

--R. PHILLIPS

Dallas

Dear R. Phillips: You’re right--getting out of debt is not easy. And I said so in the book. But since debt is one of the greatest stresses of our modern world, it would simplify life immensely if we reduced it as much as possible.

According to the 1995 Economic Report of the President, the average American family spends close to 70% of its income on a combination of mortgage and consumer debt. Many consumers spend money they don’t have on things they don’t need because they haven’t stopped to think about their spending habits.

If people set up a plan to get out of debt, as I suggest, they will evaluate their spending and make needed changes. If they learn to take a long-range approach to spending, rather than filling a short-term need for instant gratification, most people could end their debt problems in just a few years.

And yes, not everyone is in a position to pay off their mortgage in one lump sum. But I outline half a dozen ways that one’s mortgage can be paid down considerably over time, thus ultimately saving incredible amounts in interest payments. If you’re cutting back on your spending, you’ll have more funds available for mortgage pay-downs.

The fact is, a great many Americans are living in homes with mortgages that are far larger than they can actually afford. Yes, a bank may have approved the loan, but if you’re paying close to 50% of your income in mortgage payments, you can’t truly afford it, even if standard lending practices say you can.

Please don’t tell me that living on half your income is impossible. I have lived on half my net income all my life. I spent many years without a lot of the trappings most of my peers had and thought of as necessities, such as new furniture, fancy cars, second homes, televisions, stereos, CD players, multiple phones and camcorders, because I couldn’t afford them. Unfortunately, many people would rather impress their friends than live within their means.

People could dramatically reduce their spending if they refused to buy anything they can’t pay for in full by the end of the month. They could also reduce their spending by never shopping without a detailed list, never buying anything unless it’s on the list, and never buying anything they didn’t know existed until they saw it in a shop window.

If people were committed to getting out of debt and became disciplined in their spending habits, buying only absolute necessities (a camcorder is not a necessity; neither is a house you can’t afford), most could drastically reduce their expenses and have money to set aside for retirement.

In fact, I hear all the time from people who’ve been doing this for years and from many others who are now starting to do it.

Even though it isn’t easy, it is doable. And as any investment advisor will tell you, there’s no time like the present to get started.

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Elaine St. James is the author of “Simplify Your Life” and “Simplify Your Life With Kids.” For questions or comments, write to her in care of Universal Press Syndicate, 4520 Main St., Kansas City, MO 64111.