Wednesday, April 25, 2012

The First Steps I Took Toward Getting Out of Debt

If you've been here a while, you've been walking through this process of getting out of a monumental amount of consumer debt with me.  If you're new here, please know that we're not there yet, but we're getting there!

The point is, this process has been going on for over 2 years now and we're at least a year (or more) away from being completely debt free. In all of this time, I have been telling you about the here and now, but I want to revisit what we did to start this long (and sometimes seemingly endless) road to financial freedom.

1. Had an emotional breakdown. Yep...that's right. I lost it. I don't remember what set it off, but there was that day, that moment when I realized how much trouble we were really in.  And I cried. And I blamed. And I fussed. And I fumed.  And then I got over it.  I think the breakdown was an essential part of my process.  I had to go there before I could move forward and I think the raw emotion that was set off made me realize just how big of a deal this really was. So go ahead - have a breakdown. And then get ready to move forward.

Photo source: zd
2. Sat down with spouse and the online banking statements and looked at what we were spending. Yet another important step that many people miss.  People will tell you to "make a budget" - but how in the world are you supposed to know how much to budget for food if you have no idea what you are currently spending.  Categorize it and write it down.  If you are spending $800/month for two people to eat, you can deal with that later. You might even get it down to $200/month. But before you can know what is doable - what is reasonable - you have to know what you are currently spending.

3. Segregated the necessary spending. Here it is. The power bill. The credit card minimum payment. The mortgage. The car payment. These are all of the minimum payments that you have to pay everyone in order to live right now.

4. Noticed what our income was. Now, compare this to your necessary spending. If the spending is above the income, big changes are coming.  If you can cover the initial necessary charges but not the "extras" your road might just be a bit easier.

5. Started making cuts. First cut out all of the extras. The shoe shopping each weekend. The convenience store snacks. The manicures (I know...that one might hurt). Cut it all out. You can get them again later, but the key here is to make progress and make a lot of it at one time. Then once you are down to the bare bones, cut it down again. Do you really need those premium cable channels? Do you really need cable at all? Do you really need that weekly detail job on your car? Can't you do it at home? Now that you've done this twice, take a break. You'll find more cuts later, but too much at one time can be simply too much.

6. Found extra cash. This may come from freeing up some of those previous purchases. Maybe you'll need to sell some extra "stuff" you have. Maybe you need to get a side job. Just find cash.

7. Read a good "getting out of debt" book. We chose The Total Money Makeover by Dave Ramsey. It was inspiring. It was embarrassing. It made sense to us. You can choose a different one if you want, but this is the one that really hit home for us.

Photo source: ekki
8. Got moving. After deciding on a plan based on the info we read, we had to get moving. Putting it into action was exciting and inspiring at first. We were having a blast making changes and seeing those bills decrease.  We learned to live without things we thought we needed. We found that we could make even more cuts in our budget.

9. Reduced our debts.  Of course we were paying them down. We also called for lower interest rates, refinanced our home, took out a low-interest loan to replace a high interest one, snowballed our debts, threw every extra paycheck at our debts.

10. Rewarded ourselves. I will honestly tell you that we could live more frugally than we do. Plenty of people live simpler lives than we do. We still occasionally go out on dates and pay for a sitter. We still pay for summer camps and sporting activities for our kids. We have made huge cuts but continue to reward ourselves for the strides we have made. As long as they are in moderation and we keep it under control, it makes us feel a little more "human."

11. Made adjustments.  I hate to tell you, but your plan will not go as you want. Not all of the time. We were sailing along smoothly and then BAM! Chip lost his job. That really threw a wrench in our plans and seriously decreased our income possibilities. We had to adjust. We had to modify our plan. We had to make more cuts. We had to refocus. At some point something (and I hope it isn't job loss for you) will interrupt your plan. You have to reshift and keep going.

12. Stuck it out. This is the hard one. This is the day-to-day feeling after a few months of being "gazelle intense" (Dave Ramsey term there) of just being tired of this whole process. I find ways to remind myself that we've come so far...that's why it's so important to me to show myself how we're in $25,000 less debt than we were 2-1/2 years ago. I have to try to remember what the future will look like when we arrive at that debt free goal. Sometimes it's easier (like when we sent a huge check to a credit card) than others (you've seen our dining out numbers, right?).  But it is a process. This is, to me, by far the hardest of those steps. And the one that lasts the longest.

Photo source: _TekToNik

But I have to keep my eye on the prize. I have to remember where we've come from. And you do too.

So if you're starting out on this journey, let me tell you Welcome to the Club. You aren't alone. You aren't as dumb as you might feel (I know I did). You have nothing to be ashamed of. In fact, you have less to be ashamed of now that you're starting your journey than you did when you were ignorant of your bondage to debt.

We're going to do this together. Some will do it sooner. Others will take longer. But we'll all finish this race as long as we keep running, or jogging, or even walking. The finish line is out there even if it isn't in sight. Forward progress is the goal right now. It will get us there.


  1. These are all great things to get out of debt. Right now snowflaking debt works great for us!

  2. Good for you, Michelle! I love that different things work for different people - but we're all on the same path. Keep it up!