Debt Monkey on My Back
Dealing with Debt
Photo credit: imelenchon from morguefile.com
As I write this article, I find myself in debt. What this means for me, certainly may mean something totally different to someone else. The reason that I consider myself to be 'in debt' is because I don't have enough money, it would seem, to make it to my next paycheck while paying all my bills on time. It would be possible to pay my bills on time if it weren't for all the fixed payments that I have to make each month. These payments are things that I cannot control - I signed on the dotted line and am now committed to making those payments no matter what. Short of bankruptcy, I suppose.
These payments for me are; mortgage, insurance (house and car), car payment, truck payment, personal loans, medical expenses, boat payment. These amounts are 'fixed' because they cannot be changed.
What I consider to be 'bad' debt are the payments on credit cards and lines of credit where making the minimum payment each month is essentially getting me nowhere. I am throwing money away on these payments since it barely covers the interest each month and the outstanding balance barely budges. These payments will go on and on unless I find the money to aggressively pay them down and eliminate the payments each month. By doing this, I will be left with the stuff I want (house, car, boat, insurance, scholarship fund, etc.) and have money to live comfortably to the next payday.
First, I add up all the 'bad' debt and figure out exactly how much I owe. Since my credit cards are all maxed out along with my line of credit, this total is a round number; $45,000. Wow, that sucks. So what to do about this? First, I will analyze all my past mistakes and beat myself up for making very poor choices when it comes to my money. I will regret decisions I made about how to spend my money and for spending it when I could not actually afford it. Credit made it possible to acquire the things I have without actually having to save money and use my cash. Great. Now what?
Now I move into action by creating a plan to get out of debt and stay there. I create a budget using a template I found online. This shows me how much I can afford to pay back each month to slowly dig myself out of the hole I've created for myself. I am educating myself as to the necessary steps I need to take to get out of debt. There are many helpful budgeting books available that can really help create a solid plan for each unique situation. I do not blame others for the position I am in today since, ultimately, I had a choice of how to spend my money. And I still do. The difference now is that my focus will be on repaying what I owe over 24 months and then putting that money back into my budget for things that are my new priorities; savings, an emergency fund, and planned spending (an actual vacation, maybe?).
The relief felt simply by having a plan is immense. It is worth the time and math. I invested in a practical math resource for help with this part in order to figure out exactly where I stand and what it will take to get my financial life back on track and stay there.