by Bob Trowbridge

Created on: November 06, 2008

There is only one way that I know of to pay off debt. You have to spend less money than you make. Notice that I did not say that you need to make more money than you spend. Spending less money is much easier these days than making more money.

Personal savings in this country are close to zero and often in negative territory. We have been trained since childhood to spend, not to save. Personal debt is the highest it has been in decades or perhaps ever.

Americans somehow bought into the fiction that they would always make more and more money. They could go ahead and buy what they wanted right now and not worry about paying it back until later. That is an American mantra, "Buy now, pay later."

One of the things that Americans have never particularly paid attention to is what their money is actually worth. We tend to think that if we get a 3% raise, we now have 3% more money than we had before. The idea that inflation may actually be higher than 3% doesn't enter into the equation. The shocking fact of the matter is that in real inflation-adjusted dollars, Americans are not making any more money today than they did in the mid 1970s.

Because prices are much higher, we actually have less money than we did before in terms of purchasing power. It is not how much money we have that is important. It is how much our money will buy.

Since the Federal Reserve was instituted in 1913, the dollar has lost some 95% of its value. That means that what cost a nickel in 1913 will cost about a dollar today. So we are being taxed by two stealth taxes, inflation and monetary debasement. It takes more and more dollars to buy less and less "stuff."

The best way to begin to pay off debt is to immediately stop creating new debt. One smart move would be to cut up your credit cards and only use cash. This is wise because credit cards charge usurious interest if you carry a balance. An equally or more important reason for using cash is psychological.

When you buy something and hand over a piece of plastic, it's as if you're not really paying for it at all. There is a disconnect between handing over that piece of plastic and actually spending your money. If you have to take actual bills out of your purse or wallet, then you really feel like you're spending money. You may think twice before you plunk those pieces of paper down.

So the only way to pay off debt is to A) stop buying things you don't need with money you don't have, and B) be more conscious about where your money is going.

One way to lose

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