When No More Debt really has to mean No More Debt.

December 30, 2008 8:57 AM

Someone near to me has recently recognised, and begun to address, a serious problem with debt. The debt is not a result of extravagant spending; it seems to stem from persistently bad decisions about consumer credit, and a habit of repaying loans with other loans. So... once the debt has been consolidated and the credit cards have been destroyed, what measures can this person take to ensure they never, ever get into debt again? Is it possible to voluntarily ban oneself from being offered credit? The person is in Australia.
posted by anonymous to work & money (9 comments total)

Like cut off all their fingers? Put their name on a government watch list?

I don't mean to be a smarty pants but debt is debt regardless of how it was generated. To prevent this from occurring again requires deep introspection. There's a behavior here that must change. It's nothing to be ashamed of, it's part of growing.

Check out http://debtorsanonymous.org

I really like this one: http://www.yourmoneyoryourlife.org
posted by ezekieldas at 9:24 AM on December 30, 2008

I had credit card debt and used the "pay lowest balance then close that account, and apply that extra nut to pay down next smallest balance" method. It took years and initially seemed impossible, but a clear plan, a reason to get out of debt, a coach, and years broken down into months helped me eat the elephant one bite at a time. My experience was that once I got truly out of debt, and had closed all of my accounts, I felt so FREE and relieved that nothing in the world could entice me to get back into that situation. It sounds like this person needs a reason to get out of debt, a methodology or program and someone to help them stay accountable to their plan.
posted by pomegranate at 9:28 AM on December 30, 2008 [1 favorite has favorites]

Usually, entering into a debt consolidation program is enough to screw up your credit bad enough to stop getting offers. They could also try falling behind at least 30 days past due on all their credit cards before consolidating and paying them off. Usually, when someone is over 30 days, it not only affects their credit report, but it also opens their account up to the possibility of settling. They can pay off the account at a reduced balance AND it goes on the ol' credit report, reducing the offers said person should be recieving.
Lastly, there's always 'self-control'. I've heard a lot about it, although I will be the first to admit I know little. I'd try google!
posted by Bageena at 9:39 AM on December 30, 2008 [1 favorite has favorites]

I know a lot of people who swear by debtor's anonymous, fwiw.
posted by small_ruminant at 11:09 AM on December 30, 2008

Only pay in cash, and by cash I mean actual physical currency, not checks. Obviously you can't do this when you buy a car, but you can do it when you buy a TV or an expensive dinner etc. And I don't mean cash advances on credit cards, I mean taking cash out of your checking account.

The act of having to think in advance about how much money to take out of the ATM, or the frequent trips to the ATM, coupled with seeing the physical pieces of paper leave your wallet will really drive home the resource scarcity side of consumer spending that consumer credit exists to hide. This will then lead the person to internalize the need for a budget (i.e. planning my spending weeks in advance, not days in advance).

Furthermore, paying in cash will eliminate the accumulation of interest and finance charges that turn borrowing into an inescapable black hole for many.
posted by Pastabagel at 1:11 PM on December 30, 2008

AFCCRA is an Australian mob that appears to offer free debt counselling funded by the government. Beware, there are organisations out there that offer free initial advice and then charge, because someone's who's in debt is obviously an easy mark. Also, the Australian SEcurities and Investment Commission offers financial counselling.
posted by b33j at 1:40 PM on December 30, 2008

In the US you can opt out of receiving pre-screened offers of credit, and you can also, in many states, lock your credit report so that you can't get credit on a whim. (That is, you have to explicitly call the credit reporting agency and unlock your report before anyone can check your credit rating.) I would be surprised if Australia did not have similar tools. Usually they are not intended for managing one's impulses, but they work fine for this purpose.
posted by kindall at 1:49 PM on December 30, 2008

Go find Dave Ramsey's Financial Peace or Total Money Makeover, and follow the steps. It's common sense, but seeing someone right it down is part of the awesomeness. The feeling as you get out of each debt is amazing.
posted by deezil at 7:17 PM on December 30, 2008

Australian credit works differently to the US - there is (AFAIK) no 'credit report' that you can lock, and we don't have a credit score. I would not take any advice that comes from a US perspective.
posted by jacalata at 12:15 AM on December 31, 2008