It's very easy when you are having a hard time affording life to duck under the covers and only come up for air when you have to. It seems easier to live day to day rather than getting all caught up in what money is owed where and what happens when you get your next check and so on.
I used to be this way for the longest time. I was never really looking to get my debt paid off, I was merely looking to maintain it at its current state.
Now I know the balance on every debt that I have. I have a little balance sheet that contains all of my balances, minimum payments and goals. I can quote the numbers if asked. It's very organized and a little concerning.
I am hyper-aware of my money. I know what I have, what I need, and I have a plan.
I firmly believe that this is the key to getting myself out of debt. Here are some tips for making yourself more aware of your money and figuring out how to get where you need to be.
1. Make a Balance List
I have a list in simple text format. At the top are all of my debts and their balances in the order that I would like to pay them off. Then I have the total of all of these. After that, I have the list of minimum payments again in order. Below that I have the total of my minimum payments and my goal of what I would like to reduce them to. Next is how much all of my expenses come to and how much extra money I need to make each month in order to pay for them. At the bottom is a list of my assets.
I update this list almost daily, which allows me to track my progress.
2. Track Your Net Worth
Every month I input everything into my NetWorthIQ Profile. This allows me to really see my progress month to month. I've not been doing it for very long, but I have found it useful. I count my vehicle as an asset, but I don't include any other personal property on the list. The really good thing about doing this is it also tracks your percentage change in each category so you can see what area has been affected the most.
3. Allocate Extra Money Immediately
Whenever I make extra money, be it from freelance writing or from my second job, I immediately put the money where it needs to go. This means I often make more than one credit card payment in a month. Since interest is usually calculated daily, making early payments benefits me since I can save a few cents here and there. Also if you are making these payments, you can again see the progress you are making. Make sure you update your balance sheet when something has been paid. I usually put an asterisk by my minimum payments on my sheet and delete them when that payment is made. I also almost always pay my bills early.
4. Make a Plan
I have a Debt Snowball plan. It needs to be updated, but I'm working hard towards a goal. I'm very close to having the first of 7 debts paid off and believe me, there will be much rejoicing. I've been through all of this once before and then I let it go when I moved and everything became more expensive. Having a plan is going to be the only way to get completely out of debt before I am thirty.
5. Keep Track of Your Spending
Keep an eye on where your "fun" money goes. It's a good idea to try and restrict over-indulgent spending. My husband and I noticed that we like to buy a lot of books. So now every month, on the first of the month we have "book day". We each purchase one book from Amazon.com (and we order together to get free shipping). If we want another book later in the month we add it to our wishlists, and we wait. I have an entire shelf of unread books, so I tend to steer towards cookbooks now. I am even picking up the odd magazine subscription instead. If you buy coffee three times a week, try cutting down to two. Go to your favorite Indian Restaurant every week? Make it bi-weekly and go at lunch time when it's cheaper. Allow yourself the good stuff, but try and cut it down and keep it manageable.
Awareness of a problem tends to be the first step towards recovery. How aware are you?
June Networth Update
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