Just about every week I harp on some aspect of how to get rid of debt, live on a budget or do something more frugally than you previously thought you could. Many of you have told me all that stuff is fine, but asked, “where the heck should I start on all this mess?” Today is your answer! Taking content from my book, numerous other posts on this site and others, and summarizing them into a few simple steps will hopefully give you the ammunition to get rid of your debt and live free of all the junk that goes with being a “slave to the lender.”
1. Are you living on less than you make?
You MUST do this consistently or you’ll never get out of debt. Personal finance is a simple math equation. INCOME – SAVINGS – EXPENSES = 0. If you can’t make that math work, you must change something until it does. Simple as that. Changing the math isn’t so easy sometimes, but don’t over-complicate what you need to do mathematically.
2. Do you and your spouse agree on money?
Good decisions or bad, you must be in agreement with your spouse on finances. That way there can be no finger-pointing when something goes wrong and no undue credit taken when something goes right. You’re in it together. PERIOD. If you aren’t married, you’re stuck arguing with that person in the mirror…and he/she can be pretty feisty.
3. Are you doing a budget every month?
If not, why not? If so, why isn’t it working? You need to be living on a written budget that “spends” all your money on paper before you get a single penny in hand. Then you can simply execute on your written plan. In my full-length book, From Debtor to Better, I go into the mechanics of all this in great detail. In my shorter book, It’s Not About Money, I give you the basics to get you started.
4. What about emergencies?
If you’ve made the commitment to be debt-free, you need a cushion against the inevitable unexpected expense. This is called an emergency fund. It is cash (not another credit card or line of credit in any form), in a savings, checking or money market account, designated only for true emergencies. How much? At least one paycheck’s worth. How do you save this when you’re in debt? Make it a priority and find ways to earn some extra for a short time, if needed.
5. What can go away?
The easiest way to spend less money and thus to be able to pay extra on your debts is to cut unnecessary expenses. We all have them. Homework: look at every single thing you paid in the past month and be ready to defend why you wrote that check or approved that expense. Look at the cell phone bills for things like insurance, data packages, etc. that aren’t needed. Look at the cable/satellite/internet/phone bill to see if there are promotions you could take advantage of or if you could get rid of any of them altogether. Look for the most affordable yet reliable network cable installation, you may want to see here for more info. Look at the entertainment expenses (eating out especially) and make sure you really want to spend that money instead of staying home. Look at EVERY ONE and make sure you don’t repeat history if history was a poor choice.
I guess that’s PLENTY to get you started. I hope it will be helpful to those of you who haven’t started because you just couldn’t figure out how. And for everybody else…no excuse – get to it! When you make it important enough, you’ll do it! Let me know if I can help.
What tips might you add as critical to getting started on the journey to freedom from debt?
Hi Stacy. I love your blog and the contents! I’m experiencing a dilemma and I’d like some advice. I haven’t worked in 9 years because I’ve been a homeschool mom. My kids just started traditional school this year. Currently, my husband is the only one working. Also, we have one vehicle that he uses for work .We can’t share our car because he works long, crazy hours so I can’t work outside the home. Our biggest expense is our mortgage. We don’t have a car note. However, we have utilities and the other typical expenses. We eliminated cable and have Netflix. I’m in the process of trying to do a budget (unsuccessful) and eliminate other unnecessary expenses. I use coupons so this helps us save some money on our grocery bill. I’m trying to start a business so I can help financially. Do you have any suggestions on how I can make money currently to help us get out of debt sooner?
Hey Janine, the budget will go a long way to making the most of your income. Don’t give up on getting that to work! Beyond that, you may want to go back and read a couple of series we did a while back. Each of the links below will give you the first article in that series. http://www.stacymakescents.com/this-is-how-we-do-it-part-one
http://www.stacymakescents.com/how-to-make-money-doing-what-you-know-part-1-craft-festivals
Hey Stacy! I just wanted to say that I really love your blog and your honesty and I really feel that you are here for “us”. I do have a question, I am wanting to be a stay at home mom again, but we have student loans, and I just cant see being a stay at home while we have them. Any suggestions?
Hey Sarah,
I think SAHMs ROCK! I’m a huge fan of mamas staying home with their kiddos and both Stacy and I have written about it some. Check out these articles and let us know if you have more questions. I’ve also just prayed for God to give you the wisdom to make the right choice in this.
http://www.stacymakescents.com/10-questions-for-a-potential-stay-at-home-mom
http://www.stacymakescents.com/14342
Thank you for posting this! These are things my husband & I KNOW to do, but have only been putting them into practice recently.
One of the sayings in our house has become “swap-ortunity”. Would we rather eat out today or pay an extra payment to be debt free quicker? New shirt or new life? You get the idea. All we have to do is look at each other & say “swap-ortunity” and we both are in agreement – even though its hard at times.
Thanks again for the encouragement!
Love it! Thanks for giving me this great new word! 🙂
I think being on top of things helps. Don’t wait until something breaks completely–take care of it while it can still be fixed. Like the old saying “A stitch in time saves nine.”
While this can go to the opposite extreme as well (“fixing” something just for the sake of doing it), this is a great tip! Thanks for adding. Maintaining what you own and taking good care of it SHOULD be common sense!
Such perfect timing for us. We’re unsure about what to do. We’ve been financing a 2006 minivan for our family of 6, still have $8000 on loan for $300 a month. It also happens to be #2 on our debt snowball. Should we hit that bill or should we look to get another minivan for $5-6k? Not much of a price difference. Or should we do a sedan and pack in the kids in the backseat? Cheaper price, but not very practical. After mortgage and home equity, the car is the highest monthly outgoing payment. We’ve cut everywhere else except cable/phone/internet that will charge $500 to cancel contract (we pay $100/mth).
Also, any ideas on how we can get out of a timeshare that we pay over $800 in annual maintenance fees? The resort will not take it back and we have been unable to sell it.
Any advice would be greatly appreciated! God bless!
I’d stay with the van you have now, knowing all the things that might be wrong with it instead of buying another and having to pay taxes and deal with the unknown of what might be wrong with the “new” one.
As far as the timeshare, that is a BIG one that I defer to Dave Ramsey’s advice on – http://www.daveramsey.com/article/the-truth-about-timeshares/
The short of his answer is this: find out the current pricing on a comparable plan to yours, then get in touch with a sales guy and tell him to sell yours at a cheaper price while offering him double his normal commission. You can get it out of your life and the salesperson will be motivated to help you do it. Bad decision in the past that will cost you some money today, but about all you’ve got. Hope that helps.