Do you believe in life after debt?

By Donna Freedman

Suppose you had no debt.

Make believe you've paid off credit cards, student loans or anything else you owe. How would you restructure your life? Would you feel free to take a chance on a new career? To move to a new place? To retire early?

And would you create a financial plan for all the money you used to throw at monthly payments? Or would you slide slowly back into debt?

"The people who have a game plan are much less likely to wind up in trouble again," said Robert D. Manning, the author of "Credit Card Nation: The Consequences of America's Dangerous Addiction to Credit."

We put up with so much just because we need to pay the bills: abusive lenders, bad jobs, bad marriages. It's easy to fantasize about their absence. But what takes their place? If you can't imagine what you would do with your life, let alone with your money, you're not alone.

No magic wand

Few people win the lottery or inherit a fortune. But all of us seem to wish we could. "People think there's an instant little magic wand that's going to give them a million dollars, that they don't have to work for it," Manning said.

One Smart Spending message-board reader recently did experience a windfall: the sale of personal property that yielded about twice as much as expected. Elaine, who asked that her last name and city not be revealed, disposed of all her debts in 10 minutes of online bill paying. She and her husband have been paralyzed with indecision ever since. Their only real plan is to pay off their home in the next few years.

They have been funding their retirement for years, so for now the extra cash is "this huge emergency fund." But Elaine worries about "becoming a miser."

"Now that I can spend money, I don't," she said. "Because I have all these choices available to me, it's scary."

Having a deep financial cushion is a problem that many Americans would love to have. But Elaine's anxiety is both real and understandable, according to psychology professor Jill Norvilitis of Buffalo State College. Newly financially secure, the woman is likely "terrified that she will lose control and return to (indebtedness)."

• Video: Budget your way to smart spending

"I would want to see her develop a realistic plan of what to do with the money," Norvilitis said, "including identifying a small amount that is mad money to spend on whatever she wants."

Long-term decisions

Sometimes, life teaches us financial lessons. A reader posting under the name "Beangal" ran up credit card bills in her 20s, paid them all off -- and then "got right back in."

Recently, she wiped out her consumer debt by refinancing her home. She now evaluates every purchase and steadily funds both savings and retirement. "I'm just smarter about my money now," Beangal concluded.

Continued: Set goals

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