Will I EVER Get Out of Debt?

Debt can be overwhelming, stressful and even wreak havoc on your health. I know from personal experience….and, it is often difficult to focus on anything else. At one point, I avoided going to my mail box to get my mail because I knew all that was waiting for me were bills. People yelling at me in CAPITALIZED, RED FONT that my bills were PAST DUE. Did they really need to alert everyone at the post office, my mailman and anyone else who came into contact with the outside of my envelope that I was failing? It was awful and I don’t wish that experience on anyone else.

When I tell people that I paid off more than $77,000 (and still counting) in the last 24 months, they are shocked. They often ask me, “really?” I smile, proud of my accomplishment. Yes, really. It is doable and YOU can do it too! But, there is ONE requirement. You must believe that you can do it and put action behind that belief. I know that sounds silly and philosophical, but it is true. The old quote we have heard time and time again by Henry Ford, “If you think you can or you think you can’t, you’re right” is absolutely correct. Once you know you can…there are three easy steps to take to get you on your way!

Know Where You Are

How can you make any progress if you have no idea where you are at? The first thing you will want to do is gather up all of your statements. Take out a note pad, or if you are tech savvy, create a new spreadsheet. List all of your debts on the sheet from smallest to largest. Be sure to include the Due Date for each bill as well. This is important, especially if your pay schedule is infrequent or varies. Don’t forget to include any debts where you have selected electronic statements only, or any friends or family members you owe money to. They all need to go on this list.

Here is an abbreviated sample so you have a general idea…

Grandma Jane

$300.00

Pay ASAP

Chase

$487.32

Due: 15th of the month

Bank of America

$2,597.33

Due: 17th of the month

Visa – Credit Union

$7,645.27

Due: 3rd of the month

Car – Mine

$10,345.91

Due: 24th of the month

Total:

$21,375.84

Now…add up the total amount of debt you have. Don’t worry about the number yet…if it gives you shell shock…step away for a moment and sit back down. You got this! You have the total? Move on to step 2.

Know What You Make

Most people have an idea what they bring in annually, or at the very least by paycheck. However, I have also found that some people have no idea what they make other than their hourly wage. Take a moment and pull out your paystubs, or go online to your paystub website such as ADP and take a look at your income. It is easiest to look at what you bring home each pay check and calculate your monthly income. If you want to know what you make annually (after taxes and deductions), then multiple your monthly take home pay by 12 and you will have your total income. If it seems like it is extremely low to you, or you are paying a lot of money out in taxes, it would be a good idea for you to consult your tax professional. They may need to discuss your withholdings to see if you have the proper amount being taken out or if you have way too much coming out each month. Now, looking at your income and looking at your total debt, we have a starting place! That’s awesome! Keep going!

Create a Monthly Budget

Now, you want to create your monthly budget. All a budget really is, is a written plan to tell your dollars where you want them to go each month and when. We need to make sure that we cover our basics FIRST. Some of you may already be familiar with the Four Walls, which is something both Dave Ramsey and Chris Hogan often refer to when helping people create their first budget. The Four Walls are your basic needs for living. They are food, shelter (including utilities), basic clothing and transportation. These four items will come out of your budget first.

Then, you are going to begin paying all of your MINIMUM payments you have. If you have left over money, that money will go towards the SMALLEST (yes, smallest) debt on your list. We want to knock out the smallest bill first to build up momentum, and keep us going and motivated. When people start with the largest or the highest interest rate first, they end up losing steam and go back to old habits never making a dent in their debt. If you have a debt that is owed to a family member, a friend or the IRS, you may want to consider paying that off FIRST because it can create additional stress, tension or problems (IRS) in other areas of your life. You may find that you are less stressed if you no longer owe your brother in-law money and seeing him every weekend is much more enjoyable! You will also want to get the IRS paid off as soon as possible because not doing so can create additional stress for you financially.

Once you have your budget created, STICK TO IT! The first few months you may have bumps along the road and forget something like a birthday, or budgeting in for snacks after your child’s soccer game. The more often you do a monthly budget, the better you will get. Also, as you begin paying off those debts, one by one, you will find that you sleep better, feel better and have taken total control of your financial life! It is very empowering.

Anyone can do this, no matter where you are right now. If you find that you have more debt going out than income coming in…you no longer have a budgeting problem, you have an INCOME problem. Find other ways to bring in money each month, work extra shifts, take a second job, or start looking for a better paying job.

You have the power to change your life, and I know you can do it! Start today and don’t let another year pass, wishing you would have done the work.

Start NOW! You got this!