Get Your Debt Under Control – Step 1

The hardest thing in dealing with your debt problems is knowing where to begin. Here I will start outlining the basic steps I took to get my debt under control.

First, you need to organize all your debts. You can use pencil and paper, but a spreadsheet program like Excel works best. Gather all your credit card statements and write down the total balance, the interest rate and the minimum monthly payment. Total the minimum monthly payments.

Second, organize all your static monthly payments. These are bills that you pay every month that do not change - mortgage, car payment, cell phone, cable, etc. Total these payments.

Third, organize your other monthly expenses. It helps to have your past two or three bank statements. Go through each line item and determine what you spend on groceries, haircuts, dry-cleaning, etc. WRITE DOWN EVERYTHING! Don’t skimp on this. In order to get a handle on your finances you need to be honest with yourself on how much money is really going out the door. Do you smoke? Stop at Starbuck’s everyday? Do not dismiss any expense as you will find that everything adds up. Total all these expenses.

Now, total everything together. This is what you are spending every month.

Next, total your income for every month. This is what you are bringing in.

Subtract your spending from your income. What do you get? For some of us, this can come as a shock. You may find you are actually spending more per month than you bring in. This will probably explain why your credit cards are going out of control. If you actually have money left over, then there is definitely hope for you.

Go through this exercise. You will most likely be surprised at what you discover. In the next article I will discuss what to do with this new found information.