Getting Out Of Debt

So you have decided that you need help getting out of debt?

This is fantastic, because it means you understand that you are in trouble. You would be amazed at the numbers of people out there in the world who know that they are in trouble, but cannot face up to it. It can be a very scary feeling to know you are in financial trouble.

The great thing is that you are not alone, really the whole country  and the western world are in financial difficulty right now. Personal debt has been skyrocketing for years now, people have been  spending as if there is no tomorrow. Credit has been so easy to get that most of us have at least two credit cards. Now that jobs are becoming more scarce, layoffs are common and feeling secure is an unusual feeling to have, its time to look at your finances seriously.

As you will know there are people out there who have always done the right thing, they have budgeted, saved, put money into investments, not used credit cards or used them the correct way and payed them off in full every month. They are the ones who wanted to be independent and  rely on no one, they planned to be  self sufficient  during retirement and live off the interest from their savings. These people have done nothing wrong, and in many cases they are the ones who are the victims in all of this mess. Their investments went out of the window within a couple of days on the sharemarket. All those years of saving and doing the right thing and now they will have very little to live on when they retire. To those people I say, the sharemarket will come back up, it always does with time. Hang in there.

Now lets get back to getting out of debt. The very first thing you need to do is stop spending. Its a matter of becoming frugal! Its a learning process that you may be dreading but it can actually be a lot of fun to see how well you can do at spending very little and being inventive and using your creativity at the same time.

The first thing to do is have a family meeting and have a discussion with everyone. Even the little kids need to know that the families spending habits are going to change. Explain why and give them some understanding of how much things cost. For instance the cost of the mortgage or rent and the amounts that the family spends each week on food and clothing. Let them ask questions and ask for any ideas they may have. Once you get everyone involved you will find that it becomes much more do-able.

This may be a great time to offer the children an allowance that they need to budget to buy their own clothes and pay for their own expenses with. You would spend time with them setting their own budgets up so they really feel that by managing their own finances they are helping the family situation. Show them the difference between wants and needs and you will be educating them and making them better and more responsible people when they eventually go out into the world themselves.

Once you have explained to the family that things are going to change financially, and have everyone  on the same page, then its time to start doing the work to find out exactly how bad the debt is. This is going to take some work and you do need to expect that it will be worse than you thought. Most people underestimate the amount of debt they have.

Start by getting out all your bank statements for the last 6 months. Total up all the money spend on fixed expenses. These are the ones that never change like mortgage payments. Put them in their own subgroups like mortgage, insurance etc.  Next total up all your other expenses for instance, money spent on food, money spent on clothing, utilities etc. At the end you should know exactly how much you have spent on, for instance clothing, then you can divide that by 6 to find out your monthly cost. You will also know how much you have spent on bank fees, interest, miscellaneous etc etc. This is a very interesting and eyeopening exercise. So now you know what you spend. Next you need to know exactly how much income came into the family for that time. When you look at the difference in the amounts you will see how much you are overspending each month.

If you read on, this site will show you how to get out of debt completely. Its full of wonderful ideas and strategies that are free and will help you help yourself. Hang in there.