Here are the first steps to owning your money rather than being its slave.
- Write Down Your Income. From the preliminary exercise, copy this down. This will be the most "feel good" part of this exercise. I promise, it will get better after you have done the dirty work though.
- Write Down Your Debts. This one is painful. Write down the total balance, the percent interest, and the monthly payment. For each. and. every. debt. Cars, personal loans, student loans, credit cards, medical debts, debt for the last set of furniture you bought. All of them. It's okay to cry. I did. I was angry and feeling hopeless. But I got over it and decided to do something about it. And I am. And now, so are you.
- Decide What the Attack with Be. Some people snowball (like us), paying off the smallest loans first. Others pay those off that have the highest interest (the most mathematically logical path). Others still pay off those that are the most emotionally taxing. You can read about all of the advantages and disadvantages to these methods at my blog friend Man Vs Debt's post. Any of them will work as long as they work for you. Study them and see what you want to do.
- Write Down All of Your Monthly Expenses. All of them including the monthly payments from all of your debts listed in step 2. Reference what you did in the preliminary exercise to make sure you have them all. Don't forget your monthly giving if you do that.
- Add Them Up. Add up your monthly expenses. Compare them to your income. You very well might find that your expenses outweigh your income. That means that you have some work to do, but you are heading in the right direction.
- Eliminate the Extras. Remember, the goal here is to get out from under the weight of that debt and you will have to do work to do it. But you will soon find out that you do not really need all of those extras and the joy of paying off the debt far outweigh the peace you gain with a single manicure that will soon need to be retouched. So cross out all of the extras that you are going to decide to do without until your debt is under control. This may be easy. It will get harder later, as we will pare it down more.
- Recalculating. Re-add the expenses and see where you are. When you are down to the bare minimum, circle your final total.
So, you're exhausted I know. Mentally and emotionally drained. It's common and everyone who has walked this path has felt exactly like you do right now. But it is time to really make some tough decisions.
What are you going to do with the info you now have in your hands? You can ignore it and pretend it will go away, just like you were doing beforehand. But I promise, it will not go away. You can fret and cry about it, but that really won't solve anything (although a good cry might be what you need right now to relieve that stress).
If you decide to proceed, I will give you some options of increasing your "income" column and decreasing your "expenses" column to make it easier and more rewarding to pay off your debt. To get you motivated though, we're going to go on to what will hopefully be a happier subject...increasing your income.
Photo credit: Vixs