Sometimes, getting out of debt is not always the problem. In fact, some people can do a great job of setting aside money (i.e. saving) and can manage to put tens of thousands of dollars aside in a very short period of time… however, they might have a spending problem that essentially nullifies their commendable savings abilities. What normally happens is after a period of aggressive savings, these great savers but poor spenders have to cash out their savings (or equity) to repay debt and start fresh.
People with this problem will identify with this: their ability to stay out of debt will last a few months, maybe a full year. And then they use their credit. Not just for a simple purchase that can easily be paid off, but for a larger purchase that sets in motion an unfortunate spree that slowly and gradually racks up the credit cards and puts their current and future savings at risk.
The most obvious example of this type of individual can be found in every country, but particularly in the United States where, prior to 2007, people would spend excessively and then rely on convenient mortgage refinancing to eliminate their debt year after year (or whatever period it turned out to be). This was fine until property equity stopped growing and actually began to depreciate. Even though these individuals were not “saving” in the traditional sense, their net worth and equity was indeed increasing with every mortgage payment. Unfortunately for these types of real-property savers, their spending outpaced the rate of growth in their real estate. Anyway…
One interesting technique that many people like this should use involves reducing the available credit on their credit cards and simultaneously maxing out their credit card limits. For example, if credit card spending is what gets most people in the problems they have, after paying out these cards “for the last time,” they should minimize their limits to $1,000 or $5,000 or some other low limit that can be repaid easily after one month if they get into another of their spending sprees. The lower the better.
What most people dislike about this technique is that puts their “emergency” reserves rather low. This is an unsubstantiated fear because their savings history suggests that within a short period, they will have saved enough of an emergency reserve on their own. And, in the unfortunate case that something does come up before they are able to beef up their savings, then their improved credit score will qualify them for financing such an emergency purchase or debt. They key? Financing such purchases on an instalment basis, not on a revolving basis.
So, for people who are good savers and poor spenders, reduce those credit card limits and max them out so that you cannot get into trouble or be tempted to spend unnecessarily.
05. Jul, 2010 
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), I decided to go with them once again.
