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.