When I look back at my accomplishments, the list is topped with the birth of my kids and marriage to my husband. The next moment was when my husband and I officially paid off more than $37, 000 in debt AND had built up our 6 month emergency fund. The feeling of no debt looming over our heads has been amazing. Going to the mailbox is no longer something which causes us stress because there aren’t creditors sending us bills asking us for money! The feeling is truly like no other.
Like so many others, my husband and I were not as savvy with our finances as we could be. We had a lot of debt and oftentimes found ourselves living from paycheck to paycheck. In November 2007, we found the answer to our problems. We read Dave Ramsey’s Total Money Makeover. It might sound cliche, but it really was 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 (which was a benefit neither of us ever expected, but are so grateful for).
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! Are you ready? Because there is no time like right now 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 do this in order to fully commit to this change in your financial health.
Before you work yourself out of debt, you need to really have a good idea of your Net Worth. Some may think that having some debt is not a bad thing, but this will show you your overall picture of your assets and liabilities. That in turn my show you a picture that you didn’t realize – perhaps you have negative net worth rather than positive. If you find that is the case, remember that is is 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 use one of our FREE Net Worth Forms.
Again, remember that if you find your number is a negative net worth, it is OK. This is part of the journey to financial independence. You are working to turn this around and end up with a positive net worth!
DEBT PAY DOWN (also called Snowball)
In addition to seeing your Net Worth, you need to really know exactly which debts you have. You will need to prepare a Debt Pay Down (or Snowball) form. This one should be relatively simple to fill out as you will use your Net Worth form, which shows your liabilities.
You will 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). You will also include the minimum amount you are paying to each one right now. Do NOT worry about new payment at this time.
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 your free Debt Pay Down 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.
Coming up soon we will talk BUDGETS! So stick around and learn more soon!!!
(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.)