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How do I get out of debt? This is not easy to address in a short article but let me try to give some indication as to how the problem might be approached.
Initially, it is necessary to admit the problem exists. If you can do this then it will make it easier to answer the question “How and why did I get into debt”?
Once you have dealt with both these questions honestly you can take the next step – get the family involved. I believe it is necessary to involve you spouse and family as they play a very important role in you life and should be used as your support and back-up. Have a family meeting to discuss the debt situation openly and honestly. Put all you cards on the table - hold nothing back. Ask for ideas and suggestions. Ask them what cut-backs and sacrifices they are prepared to make to assist in reducing monthly expenses. It will surprise you what sort of ideas your family will put forward and since they make the suggestions it will be easier for you to implement them. The objective is to find ways of reducing monthly expenses so as to free up capital and improve the cash flow.
Now draw up a very detailed expenditure statement. In completing this task highlight what you see as essential and what you feel might be classified as non essentials.
Can the non essentials be dropped from the monthly expenses? What about alcohol, cigarettes, cell phone and entertainment? Can these expenses be reduced? Is the cell phone really necessary? Does each member of the family have to have one? You did without it before why not do it again?
Can you reduce the alcohol intake by 50% and the smoking by another 50% - how much does this save? No, I am not mad, sacrifices are called for and no one said it was going to be quick or easy. Be realistic and face facts.
When these steps have been followed, discussed, analysed and you have made decisions it is time to look at what you can save each week or month. How much additional cash do you have available?
Now make a detailed list of all the debts you have and how much you repay each month. List these from largest to smallest. Ask yourself and discuss with your family which of the debts were essential originally? Why did you open those accounts in the first place? If you can pay them off will it be necessary to use them again? Good.
Now take the additional capital you have generated by cutting back and making some big sacrifices and use this to clear off the smallest debt as soon as possible. You see, you are already making an impact on your debt situation. You are on the road to recovery? But most of all you now understand your debt situation, why it occurred and how you might have avoided it. Above all you have a plan to get out of debt.
When the smallest debt has been cleared pay all the money you now have freed up into the next smallest debt on the list and so on. The plan is simple - reduce monthly non essential expense, free additional capital and pay off accounts one at a time. Once paid off be clever and do not open any new accounts. If you cannot afford something, do not borrow in order to buy it.
© Des Squire (Managing Member)
