Good Saturday morning to ya!
As promised, I wanted to let you know how I got out of debt. Since I’m committed to writing based on prompts for this month during weekdays, I’ll try to explain it between today and tomorrow.
Okay, before we even get started, you have to ask yourself this question: Are you willing to make the hard decisions? It’s going to be hard – harder for some than others – but there will be times when you have to forgo something you really want and it’ll SUCK, I’m not going to lie to you.
As I mentioned in Dream a little dream, being out of debt seemed to be impossible to me. It started with an idea that I could do it and then all of sudden, the determination and vision took over. If I can do it, you can do it. Okay, let’s get started – I only have 2 days or should I say WE only have 2 days!
When I first went in to the bank, I was lamenting that I was paying off the debt, but it seemed like it was glacially slow. She told me that it will take some time. We had discussed 2 years and at the time I thought: “WHAT?? That’s a long time!” But you know what, it happened before I realized. The way I see it, I had a debt booster – that thing called credit – but there was no payment booster – lotto winnings or inheritance or a bucket of money. Getting out will definitely be slower than getting in. You have to accept that right now. Remember my favourite quote from Double digit followers? Yay!: any step, not matter how small, is a step away from where you’re standing! Don’t be too hard on yourself.
Speaking of not being hard on yourself, I have a small thing to say about that. You bought X or Y because it made you happy or you thought it would make you happy. You’re reading this because you want your future to have less regrets in it, correct? Okay, let’s move on….again.
Financial health is just like physical health – it’s all about in vs out. It’s not complicated or tricky. In vs out.
Make a list of what money comes in on a sheet of paper. I mean EVERYTHING! For me, I use my online banking to look at 3 months at a time. What money comes in regularly that you use on a monthly basis. For example,
- Money from parents/family/friends/government/
- Child support
- Dividends from investments
- Interest (not from your savings, unless you transfer the interest to your spending money every month)
- Savings (if you dip in there regularly for the same amount every month)
It has to be regular! No “one off” lump sums since it will give you a false sense of wealth. For me, it was salary and child support. That’s all I had in the plus column.
One another sheet of paper write down your monthly REGULAR expenses. Here’s how you do it:
Daycare $175 $975
Phone $100 $1075
Car $250 $1325
I find it better to do it with a running total so you see how the money adds up. You see your expense total go up right before your eyes rather than just having a total, not to mention the shock value! It’s reality! (I told you it could be harsh!) Also, when you do your IN total first, you see exactly when your OUT exceeds it. It’s also useful for when you bring down some of your monthly outs and you do it again. You’ll be able to compare how much slower you approach your IN total.
There are times when your expenses fluctuate, for example, long distance or data charges on your phone if it’s not included in your plan. Put the base values: use the rate that it would be if you use what’s included. If it’s something that’s intrinsically variable, like a full tank of gas, average it out.
Include any money out : savings, donations, all bills, loan payments, bank charges, magazine subscriptions, iTunes purchases, gym membership, swim classes for children, children’s allowance, hair cuts and mani-pedis. If it’s money out every month, take a deep breath and write it down and add it up. This will be hard.
I don’t want this to be too long, so let’s leave it here for today.
Please post comments about your findings when doing this process. It’ll help others. When I did it the first time, all alone, I almost threw up, but that’s just me! For you, it mightn’t be so bad!