Debt Dunk

Last post I discussed the beginning of your budget. You covered your four main categories, now it is time to look at what to do with the rest of the money. First you want to start saving a little toward an emergency fund. Do this this until you save a thousand or two. This is a must so you do not have to go deeper in debt to pay off an emergency. Next, you want to look at other household expenses such as Internet, cable, phone, house repairs, and any other household bills.

Do you still have any money left? If not, take a look at the household expenses. Can you cut your phone bill with a cheaper plan? Can you live without cable and lower your Internet plan? If so, you just discovered some free cash, if you still have no more money, you need to increase income by getting a part time job, overtime, or a better job.

The next step assumes you found or have more money to pay debt. This is where life gets tricky. If the money left does not equal your debt payments, you have two options, do not pay someone or increase your income.

Again, assuming you have enough income, you pay minimum on all debts and start paying as much extra as you can on your smallest debt. Some finance experts say lowest interest or a little extra on each. I discovered neither works as well. The reason is, you believe what you see happen. If you have a small debt and pay it off in a couple months, you see it happening. It motivates you and you start to see that you can climb your way out of debt.

I know this is very basic but you will find creating your budget a little stressful. The whole family should be part of the process. Husbands, this is for you, listen to your wife! Wives, this is for you, you can’t spend more than you make. This may be reverse for some couples but you get the point. It is a partnership and you have to live with in your income.

Please share this on Facebook or other social media to help others understand. If you have any questions, feel free to leave a comment or contact me directly.

Debt free does not mean dishonest. You made the mistakes and it is your job to fix it. If you honestly borrowed the money, you should do everything you can to pay it back. However, there are times that it may not be possible at the moment so you need to prioritize your finances.

The first key is to take care of your basic needs. These include eating, shelter, transportation, and household needs. I am talking about needs! This does not include the top brand steak, cigarettes, and other wants. You should feed you and your family on what you can afford. If you are deep in debt, you can not afford New York Strip and other more luxury items. Once you cover your basic needs, it is then time to tackle your debt.

There are many schools of thought when it comes to debt. The best plan I have found is Dave Ramsey’s Baby Steps. You save up a $1000 for emergencies and then start paying off debt from smallest to largest while paying minimum on the rest. If you do not have enough income left over to pay even minimum, you need to find ways to earn extra money or stop paying.

If your income is too low at the time, I would pay the secured debts first and stop paying the credit cards and other unsecured until you can get your income up or sell something to free up money. You can come back later and settle with the credit card companies. If you can afford, pay everyone now!

You need to have a clearly written budget laying out where all your money is going. Income and expenses should be equal. If you have more expenses than income, sell something, get a second job, or lower your expenses. You need to live with in your income or change something. Many people, including me, realize that you have more money than you think if you write it all down and stick to a budget.

The key is, nobody is going to fix you debt mess for you. You borrowed the money and you went into debt. It was partially the fault of the leeches who feed on society by pushing easy credit. However, you and I made our own debt bed. It is up to you to tackle it with all the energy you can muster in order to clear up and dunk all the debt. Cut up the credit cards, borrow nothing else, and pay off what you owe as quickly as possible. I am in the boat with you and I know it is tough but it can be done.

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