If you are in serious debt, or even what you feel is an average amount of debt but it’s enough to make you think about it on a regular basis, you need to make some changes and the time to start is NOW!! Like a lot of things in life that might make you get out of your comfort zone, starting is often times the biggest hurdle. After taking the leap at anything and giving it a small amount of time people in general often wonder why it took them so long to start and wish they started sooner. This is no different and I promise you that if you take action right now you will feel better in the morning, maybe only a tiny amount better but these tiny amounts add up quickly.
The below 4 steps can be completed, today, in less than two hours and by doing so you will wake up tomorrow with a firm understanding of what comes in and what goes out, an emergency savings account and the data we need to set up an attack plan for your consumer debt and improve our credit score.
- Get an accurate picture of how much money is coming in and going out on a monthly basis. Reply below if you’d like us to send you one! You can also sign up for Mint which is a great site that you can link your bank to. It allows you to see each transaction and label them into various categories which will give you a great picture of where your money is going. You might be surprised just how much money you are spending in certain categories, for me it fast food!!
It can take you a little while to organize everything into proper categories but as long as you do two things – Signing up for an account and linking your bank accounts then you did it! Maybe it will take you the next 3 days to get everything documented but that’s not what is important. Up until this point you have probably tried to calculate and guesstimate what’s coming in and what’s going out. What’s truly important is that you take the first step and starting the journey and knowing what comes in and what goes out each month is truly the first step of the journey. Mint will give you a great dashboard that you can check in with as often as you would like and they also have a great mobile app to boot!
- Sign up for an Online Savings account and schedule Auto-Deposits – even if it’s only $5 per month to start: This will be used as your emergency fund moving forward and you want this with a separate account so it makes it a bit harder to access. Having a budget is vital, having an emergency fund is just as vital. Life is unpredictable, what is predictable is that random things will happen to you that you weren’t expecting and sometimes that means you need money and you need it now. Once you have a nice emergency fund set up it will no longer affect your monthly budget or going into more debt. After tonight you will officially have an emergency fund – it might only have a balance of $10 but non the less it’s an emergency fund – Congrats!!! It’s recommended that you have an emergency fund with 3-6 months of your living expenses. DO NOT GET DISCOURAGED – 99.9% of people need to build this account up over time to meet those recommendations and a lot of people go their whole lives never achieving this.
The Key here is to JUST START – today you didn’t have an emergency fund or a true plan for one. Tomorrow you will wake up and no that even if it’s a small amount, you will be Auto Depositing money into it each month.
- Tally up your Consumer Debt: We aren’t going to put a plan in today as that’s the next step. The only step we need to Start Moving forward is to identify our consumer debt so we know exactly where we stand. What you need to do is to write down on paper or create a spreadsheet of each Open Consumer Debt Account that you have. You need to know the remaining balance, your interest rate as well as the minimum payment due each month. Don’t let the totals stress you out – by putting this together you have STARTED!!! Congratulations to you for taking this first step!!
- Sign up for a Credit Karma Account: Knowing and working to improve this score will give you more options along your journey to become debt free. If you don’t know your score, you probably aren’t thinking about it when making decisions. Credit Karma is a great site as you an see your progress and get encouragement along the way. For the longest time I avoided my credit score but once I signed up I was actually surprised that things weren’t as bad as what I thought they were. It’s fun and exciting to have a place to log into that can show you the effects your actions are having on your scores. Getting out of debt is a journey and little bits of encouragement are needed along the way to keep you going.
If you follow people on social media or look into success stories of others that have overcome debt and now prosper and have a good relationship with money there seems to be a common theme – Why didn’t I start my journey sooner. If there’s one thing I wish you take away from this it’s that you don’t need to have everything figured out in order to get started. These are very small steps you can take and once you do, you will have started moving forward towards a path of a better financial life. They may seem small steps but they are steps in the right direction. You climb Mount Everest by taking one step at a time, you need to have the same mindset when getting out of debt.
I hope you get started right now – and if you do, great job!!!! You should be proud of yourself for taking this step towards a more comfortable relationship with money and a more rewarding financial life moving forward!!