Ready to get out of debt? Whether it’s paying off your $9759.46 student loan, getting the collection agencies to stop calling, or getting out from unexpected medical bills, you have to start somewhere.
Before you begin, give yourself a break. No matter what your current financial situation is, it can be improved. While you can (and should) learn from the past, beating yourself up over mistakes you may have made in it won’t get you anywhere. To get out of debt, it’s helpful to find out where you’re starting from — so you can more effectively get to where you’re going.
Gather all of your financial information in one place.
I suggest using a spreadsheet for this, but if you don’t want to do it on the computer a paper notebook will work just as well. (Be sure your computer file or notebook has adequate protection from would-be information thieves.)
If you find this step overwhelming or dread doing it, force yourself to gather at least one piece of information each day anyway until you’re done. It’s worth it, and chances are you will feel a lot better when it’s done. You’ll also be able to maximize your resources.
Make a list of all of your accounts & bills
This includes savings accounts, checking accounts, money market accounts, CDs, credit cards, car payments, utility bills, phone bills, cable, mortgages, etc. Everything, regardless of the balances.
For each account, list the name, address, account numbers, cash value, total balance (positive, negative, or zero), minimum payments, due dates, interest rates earned or charged, and any special terms and their expiration dates. Don’t forget about annual things such as taxes and car insurance. This will be useful when it comes to sending in payments and deciding who to pay off first.
Add up the cash value of everything you own and owe
Your assets consist of everything you own (such as a house, car, money in the bank, etc.) Total those up, and then add up the total amount you owe (your liabilities). Subtract the amount of your liabilities from the amount of your assets. This will give you your net worth.
Don’t worry if it turns out to be negative, or isn’t as much as you would like — the point is to find out what it IS, and what the total amount of your debt is. You may also discover items you could sell to get a jump on getting out of debt.
List your sources of income
Finally, list all of your sources of income and the total monthly amount you typically receive from each source. Some sources of income may include salary, business income, rent received, child support, alimony, rebates, reimbursements, tax refunds, interest, gifts, prizes, found money, eBay, garage sales, babysitting, etc.
Once you have completed these steps, you’ll have a good picture of exactly where you stand financially, and you’ll be well-prepared to move on to the next part.
Plus you’ll have completed the hardest part of all: facing up to where you’re at right now.
