Debt reduction and management is a serious commitment. It's not achieved in one day and your finances are not improved in a day. By only dreaming about how to reducing your debt will not help, one needs to take what may feel painful steps to lead to brighter future and financial stability.
1. Decide WHY you really want to change. Make a list of your loves, your dreams, your "gotta do/have before I die."
2. Make a list of what you absolutely must get rid of in your life.
3. Prioritize each list.
4. Merge the lists-set new priorities. (Many will be interrelated.)
5. Dissect your current spending-put your figures on a tally sheet if you like. What priorities does your current spending reveal? Are these the areas you really want to focus on in this life? Cheeseburgers, pizza, so many clothes your closet committed suicide? Enough beer (or caffe latte) to fill a good sized stream?
Write down:
* Your current income.
SUBTRACT:
* What you must pay every month (e.g. rent, insurance, prescriptions, utilities, debt minimum payments, etc.), then
SUBTRACT:
* What leads to your dream: paying off debt, saving for a great trip, investing for your retirement,...then,
WHAT REMAINS IS:
* The spending categories that you can control, that can make your dreams REALLY REAL: (e.g. groceries, entertainment, dining out, clothes, cell phones, etc.)
HERE IS THE KEY: the "what you have left" is your Get Out of Jail Card. Every time you think about spending money in this category think about your top priorities... You may decide to make further changes in your life to speed up the progress (change jobs, earn a degree or trade, take in a roommate, sell your house, sell your car, start a business on the side.)
The wonderful thing about this method is that your motivation doesn't wear out. As you keep track of what you are spending and you start making progress on your heart's desires this new way of spending will become second nature.
AN EXAMPLE OF HOW TO REACH YOUR NIRVANA
Let's suppose that your number one dream is to start your own recording studio. When your paycheck arrives you pay your fixed expenses, such as your mortgage/rent, insurance, car payment, utilities, credit cards, medications, etc.
Let's say you have $400 left after all the other guys get paid.
• Your first priority may be to pay down your credit card debt faster. You take $100 and put that on your lowest balance/highest interest credit card.
• $300 left.
• You desperately want to set up that music recording studio business. It has always been your dream. You take $150 and go buy a used, but functional, piece of equipment that you will need. (Wow that feels good!)
• $150 left.
• You have volunteered for years at a no-kill animal shelter and have sent them money every month for years. (You have done this even though you later had to charge gas and food.) This time you decide to donate $10. It's better than nothing and that is something you can live with.
• $140 left.
• You need a new coat. Instead of heading for the mall you go to a thrift shop and pick up a great coat for $7.50.
• $132.50
• Your girlfriend is coming over. Usually you would take her out to dinner and a movie. She understands you are re-arranging your money and is very supportive. You cook dinner and buy a bottle of wine: $12.40. You borrow a movie from a buddy that the two of you have been wanting to see.
• $120.10 left.
• You put gas in the car. $22.00.
• $98.10 left.
• Your alarm clock dies. You go to the electronics junk store and pick up a funky old alarm clock that looks retro-and works! $6.00
• $93.10 left.
• Mom's birthday. For a surprise you bake her her favorite brownies and wash her car for her. $3.00
• $90.10 left.
• You are attending a business luncheon this week that will cost $45. It's critical to your job.
• $45.10 left.
• You put away $15 for any unexpected expenses. You feel you need this to sleep at night so it is very important.
• $30.10 left.
• You buy groceries at the deep discount store you've never been in before. Amazingly you come out with four large bags of basic groceries.
You look at all you have accomplished with that $400 (which you would have just blown before, including doing some charging) and you are proud and excited.
You now have a method of doing exactly what you want. (Please note this is not a "budget". The connotation of "budget" is enough to make most of us run screaming from the building. This is your money masterpiece, your engineered spending, your life design...)
Your money is now your friend.
Face Your Dreams, Embrace Your Loves
Pat Gilbers has more than 25 years experience in the health care and business. Visit www.TheDebtDance.com for more tips. Gilbers' unique method of getting out of debt and designing your life to attain your dreams is a new voice in the personal finance field. Many how-to-get-out-of-debt sources provide good information but not the long-lasting "why."
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