There are many things I have accomplished in my life of which I am proud. I am proud of my children, my spouse and of course – my website! Another thing of which I am so very proud was that in less than 3 years, my husband and I were able to eliminate more than $37,000 in debt (both revolving and fixed) and fully funded our emergency fund (meaning at least 6 months of income)!! We are now working on building retirement and college savings accounts and working on reducing our mortgage. It feels incredible!!
Unfortunately, like so many Americans, were were never as savvy with our finances as we could be. We had a lot of debt and oftentimes found ourselves living from paycheck to paycheck. And yes, quite frequently we would find ourselves “Robbing Peter to pay Paul.” In November 2007, however, that all changed. We read Dave Ramsey’s Total Money Makeover. While it may seem rather cliche, it was absolutely life changing for us. For the first time in both of our adult lives, our financial life was more secure. Not only that, my husband and I have grown closer and our marriage is stronger as a result.
If you find yourself wandering down the same path of financial mayhem and are ready to commit to making a change, then you will want to read further to learn how you can get out of debt!
As I mentioned above, my family followed (and still does follow) Dave Ramsey. The tools and skills we learned from him continue to influence the way we look at money — even 4 years after we first read his book. We are not the only one who believe in what Dave Ramsey teaches.
Are you ready? Because there is no time like right not to get started on working your way out of debt. Of course, we can’t just jump in and start to pay off those bills. There are some steps you should take in order to get a true picture of your finances. Trust me when I say that I KNOW this will be difficult. However, you will need to to this in order to fully commit to this change in your financial health.
The first step to working your way out of debt is to determine your Net Worth. This will provide you with an overview of your assets and liabilities and gives you an overall picture of what you ….well….are worth (financially only, of course). I am sure that many of you will be in the red – or have a negative net worth. That’s OK. This is part of the journey to financial independence.
The way you can determine your net worth is to add up all of your assets and then subtract your liabilities. You can just do this on notebook paper or in a spreadsheet. You can also download this free Net Worth form to use to help you through your calculations.
Now you will know how much you are worth at this point. If it is negative, do not worry. That is why you are here. You are working to turn that around and end up with a positive net worth.
There is one other form that you will need to complete as well. This is called the Debt Snowball. This one should be simple as it will stem from the liabilities you will record on your Net Worth worksheet. You will need to list all of your debts from the lowest outstanding balance at the top down to the one to whom you owe the most (do not include your mortgage company within this list). Contrary to what you may have heard with other programs, we are not going to look at the interest rate. You can do this on just a paper or spreadsheet, or you can download this free Debt Snowball Form.
Later, we will discuss the Debt Snowball in more detail including what it is and how you will use it to pay down your debts. For now, you just need to be able to see all of the debts you need to pay down and the order in which you will be tackling them.
If you already have a positive net worth and no debt, you will just want to skip ahead and ensure you have a fully funded Emergency Fund.
(I am not a financial advisor and the information listed within these posts is not to be construed a financial advice. Financial concerns/issues should be addressed with a professional in order to receive advice and assistance.)