Fortunately and Unfortunately,
We Become What We Think About!

Living debt free is a mindset or attitude. Having zero debt becomes a way of life. It is only partially a financial decision.

It has very little to do with the amount of money one earns or spends. Yet, it traces back to earnings and spending. Let me explain. The attitude of a frugal person is simply this. I will spend what I need to spend to survive - aka necessities. All other spending is discretionary.

What Is Frugality?

Let's describe frugality another way. The frugal person would rather be financially secure than have the "stuff" that money buys. The reason for this is simple. "Stuff" gets out-dated, old, and must be discarded. Financial security never gets old and nobody would ever discard it.

In the book, "The Millionaire Next Door", the authors explain that your next door neighbor is not likely to be a millionaire for several reasons. They don't look, eat, or dress like millionaires. Yet, they are. The point is: financially secure individuals don't value "stuff".

Having a million dollars does not mean one needs an imported sports car, alligator shoes, and $2,000 suits. In fact, it means just the opposite. That is how the million dollars was accumulated.

Q & A!

Let's ask some questions and try to come up with the answers for the financially secure individual and the person in debt.

Why are people in debt?

  • Debtor's answer: "I prefer to have a new car, smartphone, flatscreen TVs."
  • Debt-free answer: "I would never sacrifice my financial security for things that decrease in value and will end up being discarded."

Who chooses to live debt free?

  • Debtor's answer: "I do. As long as I can have the things I want."
  • Debt-free answer: "I do."

Who is living in debt?

  • Debtor's answer: "Most people."
  • Debt-free answer: "Most people, but not me - never."

If I Made $200,000 Each Year, I'd Be Rich!

Not necessarily. Many who have made millions in a single year have declared bankruptcy. Others, who have won the lottery have spent it all and are destitute.

The key to becoming a millionaire has more to do with spending than it has to do with earning. Even former millionaires declare bankruptcy.

For example, "Iron" Mike Tyson, who earned over $300 million dollars in his boxing career declared bankruptcy. Why? He spent too much of his earnings. He bought mansions, cars, and jewelry and it was reported that he ended up $23 million in debt.

Elton John had an estimated wealth of $265 million. An admitted excessive spender, he was accumulating debt at $2 million each month. His monthly credit card bill exceeded $400,000 per month before he declared bankruptcy.

Nearly 60 percent of NBA and NFL players are broke within four years of their retirement. It is believed that they feel obligated to live up to a lifestyle that they are no longer able to afford. They choose to live in mansions, travel by private jet, and pay for the expenses of their entourage.

It Is Not an Income Problem. It Never Is!

It is a spending problem. And it is correctable. "Anyone damn fool can spend money" was an often repeated statement by my financially astute mother.

Our federal government and many state governments have a spending problem. Some states have corrected the problem. Those states that did not correct the problem and our federal government will pay a huge price for overspending. Unfortunately, those who have caused the problem will be out of office when the fiscal crisis occurs.

So, now that we have established that fact, how do we convince ourselves to live within our means? How do we persuade ourselves to save 20 percent of our income - creating first, an emergency fund and second, a retirement fund?

Will the joy and satisfaction of being financially secure outweigh the possession of the "stuff" that money can buy?

These are questions that all of us must ask ourselves. Our answers will determine our financial futures.

Final Word on Celebrity Bankruptcies!

Here is a list of a few famous people who declared bankruptcy:

  • Samuel L. Clemens ("Mark Twain"), 1894
  • Ulysses S. Grant (18th U.S. president), 1884
  • Cyndi Lauper, 1983
  • Kim Basinger, 1993
  • Larry King, 1978
  • Wayne Newton, 1992
  • Debbie Reynolds, 1997
  • Dick Smothers, 2010
  • Burt Reynolds, 1996
  • Dionne Warwick, 2013
  • Willie Nelson, 1990
  • Dorothy Hamill, 1996

Some people have managed to have very successful careers after bankruptcy. Three of them are: Abraham Lincoln, Henry Ford, and Walt Disney.

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