JoAnneh Nagler knows what it's like to have debt. And she knows what it's like to pay it off. She wrote the book The Debt-Free Spending Plan to help readers stop throwing money away and get their lives back on track - at least financially.
Nagler details the obstacles that individuals let stand in the way of financial freedom and provides tips on how to get rid of debt, stop wasteful spending, and actually enjoy life.
A detailed plan that allows for doing the things individuals love while still saving money is what makes Nagler's approach to saving money different from other financial planners. She shared the tips found on her website, The Debt-Free Spending Plan, and in her book in the following interview.
Living debt-free is a goal of many individuals. How do you help people achieve that goal?
I wrote the book for people who hate numbers, never liked math or rarely balance their checkbooks. When I was in deep trouble with debt, I looked for a book to help me and all I found was a bunch of advice for people who were in relatively good financial shape - mostly advice on how to invest. That was laughable for me. Invest? In what dream-world? I was trying to pay my rent and hold on to my car while my business was tanking and the creditors were at my door!
I realized that telling people who are in debt to get out and "invest" is like telling a drowning person who can't float to swim to shore. We can't just say "get out of debt" like we can do it by just deciding to. We need tools to help us - tools that are workable and livable in the real world.
So I wrote the book with two things in mind: 1) a five-minute-a-day approach to managing our finances, and 2) a guilt-free approach to getting out of debt a day at a time. My motto is, "Start from today." Give up guilt, give up regret, give up talking about your childhood or what your parents didn't teach you about money. Just begin now and use the simple tools I'm offering in the book to take steps to live debt-free. You can stop accruing debt with these tools in as little as 30 days. Then watch your self-esteem grow and your life improve.
What are some of the biggest misconceptions individuals have about obtaining a debt-free life?
Most people believe that it will take an act of God to rescue them from their debting behavior and the pressure it generates. And that's just not true. Once you begin to look clearly at what you have, and what that will buy you, and then add in the choices you'd like to make to have what you truly want, things clear up very fast.
But no one who's in trouble can do that alone. That's what the book is for. I specifically wrote it with a lot of humanity and humor - it's not dry - and with step-by-step, easy instructions. No going back and digging up past spending disasters. No arguing with yourself over what you've spent in the past. You simply begin today, list your bills, ballpark your daily needs (like food and fuel), and start mapping out a simple plan for spending on the cash you earn - including the things you want like entertainment, vacation money, special projects, etc.
The key to my approach that's so different from many is that I really stress the importance of having a plan. Almost every tech tool designed for finances is an after-the-fact tool, meaning it enables you to track what you've spent after you've already spent it. Tracking after you've spent is too damn late! Tracking will not help me when I've gone blank and run into the shi-shi grocery and bought $27.00 worth of shrimp or come home from Target with $300.00 of stuff I don't really need.
That's why my approach is called a spending PLAN. We plan what we have in each of a few simple categories, and we look to see what we have to spend BEFORE we spend it. That makes all the difference in the world. And because the plan only takes less than a minute to check in, it's truly usable in daily life. It's not this thing that lives in our heads as, "Oh, I should do my receipts ... but I don't want to ... so I think I'll watch 24 reruns instead." The Debt-Free Spending Plan truly is manageable in five minutes a day, and gets us clear on how much we can spend each time we spend.
What are some of the biggest hurdles to get over to start living a lifestyle that is more affordable?
Getting over our resistance to beginning is the biggest hurdle. Once we do begin, our self-esteem improves so quickly that our incentive increases daily.
Let me give you an example. When I created this plan for myself, I was broke, working a temp job, had lost my business and was deep in debt. I mapped out this simple spending plan and had just $30 a month for clothes. I love clothes and that seemed impossible to live on. Then I bought my first shirt on sale at the Gap, and spent my $30. The next day I realized something was different. I didn't get that swirling high I used to get when I ran up a bunch of money on my credit cards for clothes - that giddy, "I needed these clothes! I really did!!" agitated swirling that used to fill my head the first day I bought things I couldn't afford. And I didn't have the boomerang guilt I'd usually get the next day either - the conversation in my head that went something like, "You're a total loser. You'll never get anywhere if you keep running up debt!"
I suddenly realized that none of that was going on when I thoughtfully spent based on my plan. And I got to keep the money I set aside for my CD recording fund, my travel account, and my new computer account. I was accounting for all of my expenses, all of my needs, and some of my wants. That brought incentive. And that's what kept me in, and what keeps me in now.
The thing is, when we're living on debt and feeling terrible, we're terrified we won't have enough if we stop the cycle of it all. What we don't know yet is how incredibly pleased and happy we're going to feel about ourselves when we do live within our means - even when those amounts are less than we thought we had to have. It's all about clarity. Where are we spending mindlessly, and where can clarity help redirect some of that thoughtlessly spent money to things that are way more meaningful to us - like a paid-for weekend trip, for instance.
I have a good friend who calls me every once in a while - upset - and says, "I went $65 over my plan this month! I feel so much shame!" And I always say, "Remember when we used to crash the train every month? Remember when we ran up debt to tune of hundreds and thousands and felt like crap about ourselves all the time? Well, now we don't do that. So if we run aground a few bucks here or there, it's repairable now. We can adjust."
So the object is not perfection. It's to bring our spending into reasonable alignment with our income, to stop the train-wreck of our debt and the damage it does to us, and to start building what we truly want in our lives. That's the power of the Spending Plan.
What kinds of responses do you hear from people the most regarding debt?
From people who've adopted the plan, or adapted their own version of it, I hear wonderful things. I get lots of emails and calls each month, and I just heard this from a reader: "I can't believe I've lived my whole life without this wisdom. It's so simple and it's changed my life."
My favorite, though, came from one of my best friends who, before I wrote the book, said to me, "This saved my marriage. You really need to write this down." And that's how the book was prompted into being.
That said, lots of people in my life know I've written this book, and many of them like to tell me why they "have to" debt and use credit to live. I was out running with an acquaintance friend recently and she told me how she and her husband have to run up debt, how they're in a house they can't afford, they have a kid at an expensive college, and "that's what kids expect these days."
And so I offered this: "When you're willing to talk about living without debt, I'm here." You can't make people get willing. The sad part is, she has high blood pressure and her husband has terrible digestive issues - both things that money-stress do not help. So at some point, we each have to get willing to change. I like to think of it this way: "Is this as low as I have to go before I change or do I have to fall lower? Do I have to crash the train or lose my health before I change?"
And that brings up a pertinent point. Most people think that having more money will solve their debt issue, and that's most often not true. I've worked with people who have more than a million dollars each year to live on and are still under terrible debt-pressure.
What we need to do is learn the skill of living as well as we can on the cash we have. We have a rule in our house that demonstrates this: We get three contrasting quotes for any major purchase. What that gives us is the purchase price that's right for our income. When I was looking for an engineer to mix and master my new music CD, I had saved $2200 for the project.
So I had to find someone who could do the work for that amount of money. I did and he did a fabulous job. So, yes, it takes a bit of creativity to find the services and the stuff we need at the price we can afford. But the payoff packs a punch our old debting behavior has never seen the likes of. We're happy. We're pleased. We have no money pressure. It's revolutionary.
Without giving away too much of your book, please share with us some of the tools that people need to get out of debt.
The Debt-Free Spending Plan is a simple tool that divides up bills from daily needs and asks you to keep track of a few simple daily needs categories - needs like food, fuel, drugstore items, etc.
To use it, we create a bill-paying plan so we know which bills to pay each time we get a paycheck. Then we employ a simple digital or paper notebook tool that allows us to keep track of what we have left in each area of spending. For instance, if I have $400.00 for groceries and that has to last me all month, then I can ballpark about $100 a week. Let's say I go to Trader Joe's and spend $92.00. I deduct that from my total on my notebook page and I can see that I have $308.00 left to spend for the month. The object, very simply, is to look before we spend.
We also use the tool of multiple savings accounts in our house (free accounts from a credit union) so that we always have money allocated for the normal stuff of life. We keep a car repairs account, a vacation account, a websites account (I now have three), a short-term savings account for unexpected expenses, and special accounts for things like a new computer, a CD recording fund or an outlet shopping day. Usually, we debtors don't do well with general savings accounts where it's all in one pot. We're either afraid to use the money or we use it as a slush fund when we've overspent at Costco. So making our savings meaningful by using multiple nicknamed accounts helps a lot.
Those are just a few of the simple tools I advocate in the book.
How does The Debt-Free Spending Plan differ from other plans relating to debt-free living?
The biggest difference in my plan is that it's E-A-S-Y. You don't have to go an archeological dig of your past spending disasters or your childhood. You don't have to go back and clean up the wreckage of the past few years of spending or even balance last month's checkbook balance. You start from today and give yourself the dignity of building a new history. By living debt-free, you will create a new foundation under your feet and that's history enough.
And there's a larger point to all of this. Living debt-free is not about being good little citizens and getting a pat on the head and a gold star. It's about getting free from money pressure so we can build and fund what we love. For me that's meant that I now fund an art studio so I can paint large abstracts. I write Americana songs, and sing and record them. Last year I wanted to write my first play, and I funded the time to do it. I changed my life completely when I stopped writing grant proposals and started teaching yoga as my day job. And I never could have done that without having the clarity that The Debt-Free Spending Plan gives me each month.
It's the biblical parable of the loaves and the fishes: By working with clarity in my money, my money keeps funding the things I love over and over again. It's so changed my life that I can honestly say I'm now free and I'm truly happy. That's how powerful this work is.
Your blog features several posts regarding couples spending more than they should and having issues in the relationship because of it. What do you have to say about the differences in debt between couples and individuals?
I say that having a Debt-Free Spending Plan is a complete aphrodisiac. No debt-pressure in your relationship? No money disasters? Then it's a very sweet swoon into the bedroom. We take couples debt for granted so much in this society that we don't realize how it's killing our sex lives. I'm dead serious.
When my husband and I agreed to (finally) live without credit cards and borrowing, it changed everything between us. We stopped feeling trapped with each other regarding our finances. We stopped being angry. We stopped having hurdles in our marriage that blocked us from wanting to be intimate. I would look over at him and think, "Look at us! We just took a two-week vacation and came back with no debt! I'm so proud of us!" And that respect for him, for me, and for us, has steadied the waters of everything in our relationship.
The book makes an important point about couples: We can't infantilize our relationships by expecting the other person to save us in the arena of money. We have the opportunity instead, with a few simple tools, to be accountable to each other and to ourselves, and that breeds the joy and respect that was meant to exist in our partnerships.
My husband and I had a very unique experience. We were married before, to each other, had terrible debt trouble, got a divorce, and then got back together and married again with a promise to never use credit again. And it has worked. We adore each other and there's no money pressure. We have money decisions, just not money drama.
The book outlines in detail how to manage couples' money so there is no micromanaging of each other's daily spending, assuring that each partner has autonomy and accountability in his or her money. This is, for me, the most powerful part of the book. It gave me back the man I adore more than anyone in the world, and I'm a happy woman because of it.
People love shopping and spending money. Is The Debt-Free Spending Plan something that allows people to continue to shop without incurring more debt? If so, how?
Yes. By using the plan, we learn to allocate money for each of our needs and wants so we can shop and spend without guilt. It's learning what I call proportional spending. Meaning, if I have plenty of money to cover all of my needs and I can afford $300 a month for clothes, then bravo! But most of us can't.
We have to cover food, fuel, postage, dry cleaning, household items, etc., and so our amounts for things are going to be modest. But here's the revelation: If I have $65 a month for clothes and I spend it, then next month there will be another $65, and the month after that, another $65. The point is we regularly get to spend in areas of needs and wants.
My husband's debting downfall was dining out.
So we put aside $300 a month for entertainment - movies, drinks and dinners - and that's what we have. We have to get creative sometimes, and, since we like romance, we often dress up and go have a drink someplace and then go home for dinner. We get out, we get some romantic time, and we don't blow our plan. Once a month we have a nice dinner out.
I do one little thing that's fun for me regarding shopping. I set aside $25 a month for vintage shopping, which I go and blow at the end of the month on anything I like. That gives me the hit of shopping without the guilt.
So here is the point about proportional spending: If we only have $800 to cover all of our daily needs after we've paid our bills, then we're not in the market for a $250 haircut.
It's that simple. But we can look around for a good hairdresser who charges $45 instead of the higher amount, and work that into our plan. This is what an adult does; she covers all of her needs so she's not desperate when each normal expense of living comes up.
It seems many people fear that a debt-free life means they will have to make sacrifices or change greatly. What do you have to say about that thought?
That very thought was what kept me from taking a good long look at my finances (and my debting behavior) for so many years. I used debt almost out of rebellion: I was working hard at my day job and my art life and I was angry that I wasn't making more money and couldn't fund more of what I wanted. And I was afraid that if I looked deeply into my money I'd never have another fulfilled want for the rest of my life.
And, the crazy thing is, since I've been living without debt I have had MORE of what I want, more often, than I ever did when I was using credit to live. It makes no emotional sense, but I have more guilt-free fun and more pressure-free things that I want now than ever before. What a Spending Plan gave me is CLARITY. I stopped mindlessly overspending and started getting clear about what I really wanted. I got myself a travel account. A CD recording fund. A Europe account. I keep accounts for things so I'm not surprised, like an account for sales taxes and a business license. I keep a car repairs account so I didn't have a melt-down when my car needed repairs.
Here's the ultimate motto that the Spending Plan addresses: Vagueness creates drama. Clarity creates freedom.
Living debt-free has bought me the thing I want most: time for my artistry. I've funded my painting, my new music CD, my playwriting, a ton of incredible trips for my husband and me and the time to do my art on a salary of half of what I was living on before. That's what clarity gets us. And I'm not angry anymore - I'm happy.
Please share anything additional that you would like readers to know.
I've just finished writing a new book called How to Be an Artist without Losing Your Mind, and have just turned it in to my agent. It's an expanded version of the debt book, with tools for making peace with your money, mastering your time, growing creative work ethics, and mapping a creative life that works healthily.
Creative people struggle in our culture and it's totally unnecessary. And, by the way, struggling is bad for artists. It's like running too much electricity through already delicate circuits. So this new book takes the spending plan idea and expands upon it, showing readers how to build a life that's truly meaningful to them, and helps them leave their creative gifts on the field. I'm quite proud of it, and I try to see the faces of the people it will help in my mind every day. I believe we can all make a huge difference for each other by standing up for supported, healthy, and engaged creative experiences in our lives.
And that's the point, isn't it? To create the supports under our feet to have the balanced, creative life and the loving relationships we're dying to have. To leave it all on the field, fully lived, and fully offered. That's what my books are about, and it's to what I'm committed to contributing.