Don’t Let Her “Wide-Awakety” Fool You… This picture was likely taken at 2 AM.
There are things I did as the mother of a toddler, that would totally have embarrassed me to admit, back when my now-all-grown-up little girl was still a toddler. It’s a little embarrassing to admit to those things even now, although she did survive. It’s more surprising that *I* survived, to tell the truth.
Ky was one of those kids that refused to sleep at night. I joke around with new mothers all the time, about how my kid is 20-years-old and hasn’t slept through the night yet. She wanted to sleep during the day, but that was mainly because she didn’t sleep at night. Ever.
So I went broke. Again. My retirement was short, but worth it. I got to go back to The Toy Store again, too.
Soon, I Shall Have This –
the beer, not the shirt.
Now, I work both locations – the one on the hill, which was the second location I ever worked at. Louie ran it then, before HE had a melt-down and quit (I don’t think he cried in the back room when he did it though, the way I did). His retirement lasted a little longer than mine did — before he came back to manage the location he’s in now.
Let’s say you’ve added up all your debts owing, and added up all your income and your take-home pay is actually not enough to cover all your debts as well as your basic needs and necessities.
It’s time to reassess your basic needs and necessities, here, folks. You are living beyond your means, and that’s likely the main reason you’re looking at all that debt right now. Never mind how you got in this situation, anyway – you’re here now. It’s time to get yourself out.
(this might hurt a little bit…)
These are your actual Basic Needs.
Shelter: You need a roof over your head. Does your income cover your rent or mortgage payment and insurance? If it does, does it comfortably cover the rent or mortgage payment and insurance? Do you even need insurance if you’re renting? I’ll show you how to decide that simply and easily.
Food: You have to eat. And, in my opinion, although there’s nothing wrong with trying to save money by slashing your food expenses, enough (without over-indulging) healthy food is a basic need. You shouldn’t have to try to survive on Ramen and hotdogs because you just can’t afford to eat better.
Clothing: We need to protect ourselves from the elements, but most of us don’t particularly want to wear layers of burlap and rags as a fashion statement. There are varied number of ways to slash your clothing budget and still manage to dress fashionably. That said, having a closet full of clothes you rarely (if ever) wear and continuing to purchase even more clothing is financially irresponsible. I’ll show you how to fix this habit.
Beyond Basic Needs, there are Necessities. These are things that you don’t necessarily need to survive, but that need to be purchased or maintained in order to fulfill your basic needs.
For example, transportation may be a necessity for you. In order to purchase your groceries, you need to get to a store. If you live around the corner from your favorite grocery outlet, you’re already set; but what if you don’t? How do you get to work?
Do you own a vehicle that your current budget can maintain payments on, buy insurance for, and keep it fueled, along with regular seasonal maintenance? If you have trouble with paying any of the bills associated with your vehicle, you need to consider a different, more affordable vehicle, or you need to consider getting rid of it and using public transportation or carpooling.
Another necessity may be your phone – and a lot of people are finding it more affordable to give up a home phone or landline and use a cell phone exclusively.
Internet? Is it a necessity? Maybe… do you require internet access at your home in order to support your Basic Needs? Maybe not? This is an area to mark for reduction in cost or, if you’re really stuck for cash flow, eliminate altogether (temporarily, I swear!). Most folks can access the internet for free at libraries, coffee shops, their place of work or the local mall. You may have to consider sacrificing your home internet connection when you’re first learning to dig your way out of debt – most especially if you have it entirely for entertainment purposes.
A future post will give you a snapshot of my own financial picture when in debt, along with the detailed, step-by-step plan to get me out. You’ll have the chance to play The Money Game along with me, and get yourself out of debt and into a way life that allows you to pay next year’s expenses now.
It’s called Prepaid Living. It will make you feel rich.
Nobody likes that word. Budgets hurt. They’re limiting. They make us feel poor.
If you’re in debt right now, the reason you are is that you didn’t write a budget BEFORE you started cranking up those credit card balances.
If you’re in debt, and don’t have a clue how to start getting out of that hole, CONSIDER THIS. It’s one of the steps I took to get out of debt.
If you’re newly out of debt, you need a budget to KEEP yourself out of debt. It’s not that you can never use a credit card again – you just have to change your mindset about what money and cards ARE to your budget.
They are not a way to have it now and pay for it later – that’s how you got into debt in the first place. Money and credit cards are TOOLS. They help you budget your income so you can get AHEAD.
Unless you want to be right back into debt hell again in short order, it’s time to change your spending habits. Follow these steps along with me, and before long, you will be pre-paying next year’s expenses with this year’s income, and you won’t feel deprived.
You’ll feel relieved.
So you have those scary figures in front of you. Now it’s crunch time. You need to break it down into affordable monthly payments while at the same time, STOP USING CREDIT. Debt elimination is what 100% of your extra income is going to go to.
If you are in SERIOUS financial trouble, as in “I’m about to declare bankruptcy,” trouble, you need to do two things fast, BEFORE you begin bankruptcy procedures. First, look up and make an appointment with a financial advisor. Your bank may have people on staff who can help you.
If you can make an arrangement with your bank to pay off your debtors by giving you a fixed-term, equal payment, low-interest loan, you can simplify your debt elimination from the beginning. As long as you make that one payment on time each month, you could be debt-free and rebuilding your credit in as little as three years.
I know, three years is a long time; but if you don’t start now, it could be thousands of dollars worse and you’ll have slid even further backwards financially.
If your bank or a financial advisor is not available to you, it’s still possible to eliminate that debt on your own.
Call the billing departments of all your creditors: major credit cards, department store cards, utility companies, the landlord or your mortgage-holder if those payments are behind. Let them know that you are beginning to clean up your finances and you want to know if they are able to help you with a repayment plan.
This does two things for you. It lets your creditor know that you are taking responsibility for the balance you owe, immediately putting your account closer to being in good-standing. It also eases your burden, if the company is willing to work with you by either lowering your bill if it’s a recurring, billable service, forgiving a certain amount of the balance owing (yes, some companies WILL do this for you), and/or lowering the interest rate or waiving a monthly fee provided you continue to make a timely payment each month until you’re caught up.
Once you have struck all the deals you can strike, it’s time to get back to the calculator again. If you’ve had help from a financial advisor, he or she may have already done this with you. If not, here’s how:
Find out exactly how much money you have coming in on a monthly basis. Add up your NET take-home pay from any jobs you have. If you have a partner or spouse who is on board with you, you can amalgamate those figures. Don’t forget to add alimony payments, child-support, government rebates or any other regular income you are getting.
Next find out what this coming month’s MINIMUM payment due is for each of your creditors. Include rent or mortgage payments, insurance premiums, car payments, internet, cable, phone and cell phone bills.
Add all these payments up and hopefully, your income is higher than your out-going payments. If it isn’t, you have to bite the bullet and cancel some of this stuff out of your life. There is ALWAYS a cheaper option – just sometimes, that means giving it up. A future post will cover inexpensive and free trade-offs to replace expensive entertainment options.
What you’re aiming for with all these calculations, is an almost even board with hopefully a little extra income coming in than payments going out.
Here’s where you make a choice: pick ONE of those creditors. This creditor gets more than the minimum payment every month. I chose the creditor with the smallest balance, with the reasoning that the entire bill would get paid down faster and I would feel like I was seeing results sooner.
It worked, too!
So next month, you are going to pay just the agreed-upon minimum balances to all of your creditors except for one. That one gets all the extra money you have after paying your expenses.
Future posts will cover how to speed things up with two financial foundation blocks: earn more – spend less.
Want to play The Money Game with me, get out of debt and learn to live a Prepaid Life? Subscribe to the Debt Elimination category of posts in the form below.