How To Manage Your Debt
Start With Setting Your Goals
You can't begin your journey until you know your destination. The first step is always to set your goals. Goals are the glue that holds your entire financial plan together. Until you make and WRITE DOWN your goals, you are not committed. Once formulated, your goals should be reviewed and updated on a regular basis. If you are married, set joint goals with your spouse. When times get tough, it's your goals that will keep you on the right path. Take a moment right now and make some goals.
- MY SHORT TERM GOALS: (1-4 years)
- MY MEDIUM TERM GOALS: (5-10 years)
- MY LONG TERM GOALS: (11+ years)
Find Your Resources
Budget doesn’t have to be a “Four Letter” word. Your goals give you a destination, but before you can develop a plan (your financial road map) you must first establish your starting point. This must include a close examination of all your spending habits. To pin down the "miscellaneous" category, try keeping a log of all your cash expenditures for at least one month. You'll be amazed at where your money is really going. It is extremely important to be as detailed as possible for this exercise.
- List your income & expense categories
- Create three columns for expense types and assign each expense - Fixed / Variable / Discretionary
- Include a line for SAVINGS as the first expense item
- Do the accelerator dollars exercise (Part of Debt Roll-Up Strategy in Step 8)
- Make appropriate adjustments
- Compare income & expense totals
- If the expenses still equal or exceed the income it's time for you to seek the advice of a credit counselor