It’s a burden that affects a huge number of people, whatever their financial status. Many on six figure incomes are like a lot of people, one payday away from ruin. It’s just that they have a few more zero’s in their financial statements.
This article give a few tips that I know will work for you to regain control of your debt and get back to controlling your money, instead of it controlling you.
After all, you can’t prep if you have no money, right?
Something owed – typically money – that is owed or due.
Mr Micawber’s famous, and oft-quoted, recipe for happiness:
“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”
Charles Dickens, David Copperfield
Now its alright to be in some debt – often we need to borrow money to say buy a house or car but it becomes a problem when we need to pay out more than we have coming in – as good old Mr Micawber said over a century ago – result misery.
Unfortunately it’s a situation that many of us have found ourselves in. The average US credit card debt is $15,418 and rising in 2013
The real problem about all debt is that it has to be paid back. (Governments excepted. They can raise taxes and restructure)
So whatever our situation is now, how can we get out of the mess we have found ourselves in?
Lets apply the keep it simple principle here……….
First of all you have to know where you are – really are, not where you think you are.
Get all your bills together –ALL of them – credit card statements, truck/car loans, club memberships, finance, – all of it and start making a list.
List it all out and note the minimum payments. There will be some bills like mortgage/rent, utilities, loans etc. That will have fixed amounts, don’t worry about that yet, just get them all down on the list.
Don’t forget to note down what you spend on food, gas and entertainment. It’s all money going out.
Now the horrifying bit – Total it all up and write the number down. This is the start point. Don’t get depressed with this. Remember you are taking control here!
Look at what you have coming in from everywhere.
List all the wages/income from all sources – jobs, second jobs, spouse’s income etc.
Get that number written down!
For example, if you haven’t used that gym membership for a while, get rid of it and get a decent pair of walking shoes instead. Ditching the average gym membership at $40 odd dollars a month will save you about $500 dollars a year, which you can put on destroying your debt.
Look at areas like car insurance, house and contents insurance. Anywhere you can save a few dollars.
We found that just by changing our car insurance we saved over $400 dollars in annual premiums. (Also a new provider may offer financial incentives for your business – they do, after all want your business)
Sell all that “stuff” you don’t need that is clogging up the garage or spare room, ebay might be a good place to start – we have sold stuff there that I though would be better off in a dumpster – sell it!!
I’m not suggesting you give up everything here – just focus your priorities on getting rid of debt for a while. It’s pretty liberating when you are in control of your cash again.
Add up all the income and savings you can make and write down the number.
Hopefully here you have more income than expenditure, if not look at further ways to save or generate cash. Maybe if it’s an option get more hours at work.
Now is the time to focus on one debt. A financial advisor will say – pick the one with the highest interest rate first as you will save more in the long term.
Now personally I think that’s great but here we are looking to get things done and remaining motivated so I would focus on the smallest one first.
Get shot of it quicker and move onto the next. If it’s a credit card when its paid off cut it up and close the account. Credit cards are ok, after all you will need one or two, but you don’t need a card for every store on the street, get rid of them!
Pay the minimum amount on all the others and put all the extra you can find into paying off the number one debt you have allocated to tackle first.
You’ll be surprised at how fast it goes down when you put all the extra you can find into paying it off.
When that’s paid off, start on getting shot of debt number 2 by using all the extra you pay on it.
Keep up with the minimum payments on all the other stuff. This is called snowballing and since you haven’t used the money except on debt, it’s not missed and is easier to use to destroy all the debts on your list.
When that’s done move onto debt 3 and so on…….
Now I know that occasionally we will need something like clothes, knives, guns and the odd night out etc. – but if you can consistently put aside extra cash towards getting rid of the debts you can have it all sorted sooner than you think.
Now you have more cash to spend on prepping!
Hope this helps,
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