Okay, back to our “clean up your finances” series of Frugal Fridays!
Today we’re going to talk about the “D” word: DEBT.
Ick, I know.
But necessary. After all, the only way to truly be in charge of your finances is to have no debt. I’d go so far as to say that the only way to truly be in charge of your own LIFE is to have no debt.
Proverbs 22:7 says “The rich rules over the poor, and the borrower is the slave of the lender.”
I don’t know about you, but that thought pretty well grates on my nerves! I hate being in debt because it automatically limits my personal autonomy. I can’t go on vacations, treat myself to anything, or give as freely as I’d like when I’m in debt, because VISA and Bank of America own my money…and the time spent earning that money.
It ticks me off, frankly. You?
There’s only one thing to do about it, though, and that is to get rid of debt. How do we do that, though?
We start by taking an honest look at what we owe and to whom we owe it.
Remember all those numbers I threw around in the first post of this series? Well, I’m still making up numbers, but I got a little more realistic on my examples.
So grab a pen and paper (or a spreadsheet) and start listing off every debt you have.
In one column list the total amount owed on that particular debt, and in the next column write down your monthly payment on said debt.
| DEBT | TTL Owed | Monthly |
| Mortgage |
118,000.00 |
1000.00 |
| Car Loan |
16,000.00 |
308.00 |
| Student Loan |
48,000.00 |
152.00 |
| Credit Card |
22,000.00 |
500.00 |
| Credit Card |
4,000.00 |
75.00 |
| TOTAL |
$208,000.00 |
$2,035.00 |
If you really want to scare yourself, total those columns up.
Somehow it doesn’t seem so bad to say you owe X amount here and X amount there; adding it all up and saying “I owe $208,000 total” makes for a much more eye-opening experience.
Okay. Now we can add that in to our monthly expenses.
| Mortgage |
1000.00 |
| Car Notes |
308.00 |
| Phones |
125.00 |
| Electric |
200.00 |
| Water |
40.00 |
| Annuals |
453.00 |
| Groceries/Gas/Misc. Living |
1457.00 |
| Student Loan |
152.00 |
| Credit Cards |
575.00 |
| TOTAL |
$4,310.00 |
Next write down all your income. Whether it is from a job, interest payments, spousal support, rental income, whatever. Write it down. For our purposes, use your NET paycheck. We’re only interested right now in the amount you can actually use.
| INCOME | |
| Job #1 |
2900.00 |
| Job #2 |
1600.00 |
| TOTAL |
$4,500.00 |
If you’re lucky, your income will exceed your expenses. (My imaginary family is lucky, by a mere $190 per month.)
If, however, you’re in the same unfortunate position as we are, your expenses exceed your income.
Take a deep breath: we’ll get through this.
But not today.
Today it is enough to know exactly where we stand; to see the total financial picture of our families.
Next week, we will move on to Making A Plan.
But for inspiration, take a peek at what our imaginary family would be living like if they had NO debt:
| EXPENSES | |
| Phones |
125.00 |
| Electric |
200.00 |
| Water |
40.00 |
| Annuals |
453.00 |
| Groceries/Gas/Misc. Living |
1457.00 |
| TOTAL |
$2,275.00 |
|
|
|
| INCOME |
|
| Job #1 |
2900.00 |
| Job #2 |
1600.00 |
| TOTAL |
$4,500.00 |
| Difference |
$2,225.00 |
Much better, right?
Read the rest of the series:
Part One: Where Are You Standing Financially?
Part Three: Make a Plan
Part Four: Focus on the Details
Part Five: Design Your Dream Life
So where did you fall? Do you have more money than bills or more bills than money?
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