DEBT-FREE FOR THE HOLIDAYS
Don’t beat yourself up. Don’t make yourself wrong. You may have gotten in over your head and you started using credit cards to pay your rent or your mortgage. You may be using credit cards to pay your car note and your utilities. You may be buying food for your family on credit. You may be using credit cards to pay other credit card bills.
You may not see any other way to manage your obligations right now.
Times may be tough but you can’t put your head in the sand.
5 Steps to get started:
1. Make a list of all of your debt and the current interest rate. The game is to pay off the highest interest rate debt first. You have to have a realistic picture of your financial situation. If you get lost as you are driving, you don’t just keep driving. You stop, figure out where you are and what you need to do to get to your destination. Time to stop and assess.
2. Make a list of all of your basic expenses. This can be tricky. Cable is not basic. A cell phone for your six-year-old is not basic. Double espressos twice a day are not basic. Dinners at five-star restaurants three times a week are not basic. Diamonds are not basic. I am not saying eliminate every luxury but you want to clearly distinguish basic from luxury. Some of the luxurys need to go. You decide.
3. Make a list of all of your expected income. Do not include the lottery or any other money that is in the hopeful column. What is the difference between your cash inflow and your cash outflow? That number is most likely where you are utilizing more debt to bridge the gap. Start to think of ways to reduce this gap.
4. Have a family meeting and include everyone who is creating expenses, creating debt, or generating income. Everybody needs to be on the same page. The world is not coming to an end, but if your children are spending $75 a month on movies with your cable provider, it may be time to put in some controls. Make a game of it. Everybody look to see how expenses can be reduced. Agree on the changes you will make.
5. Make a six-month plan. Money in. Money out. Keep it simple. Mint.com is a great free resource by the creators of Quicken. You can download your bank activity and see how you are doing compared to your plan. Meet often and course correct if you are getting off track. Keep the team spirit and your sense of humor. Skip the blame game on the team. It is just not useful.
You may need to get credit counseling. If you have some cash, you can start negotiating with the credit card companies to settle for less than the balance. You can also look to see if you can create other sources of income. Your hobbies are a great place to look. Many hobbies have been converted to cash generating enterprises.
There is a great article in Yes! magazine (link here) with five additional steps you can take to stabilize your financial world. Read it and include the recommendations from the article in your plan.
Don’t procrastinate. This may not be easy and it won’t improve without your intentional participation. It took time to get to this, it will take time to get out. Be persistent, be patient, and be practical. Have fun on the journey!