Hello Dear Reader,
It's five days after pay day and you're worried already how you're going to make it through the month! You were paid and the overdraft swallowed a chunk of your salary and your direct debits took the rest. Things are different this month because you are utterly sick and tired of this being the way things are month, after month after month! You were so sick of it that you emailed me. You are scared of the future and how you are going to get through this. The only thing you know for sure is that you want to get rid of debt but have no idea how.
Let's start at the very beginning. I want you to go and get all the payslips, all the bank statements and I mean both of you. No secrets, no hidden payments no denial. You have to get real about this. You need to take a deep look at the money you have coming in. That's it. That's all there is. Now that wasn't so scary was it.
Now the big scary bit! I want you to make a list and find the statements of everything you owe. The total list. The car payments, the credit cards, the bank loans, the home improvement loan, student loans and the overdrafts. Get some kind of file and put them in some kind of order. I would suggest that the smallest amount is put at the front and the biggest at the back. I'll explain why as I get further into this.
Now remember, I'm holding your hand, really tight and I'm not going to let go. I recognise that look of in trepidation in your eyes. I saw it in the mirror once. Now take a very deep breath and find out the total amount you owe. I guess it's more than you thought it would be by the way you're digging your nails into my hand. It's OK, we can get through this.
You've now faced the brutal truth. You know how much you've got and how much you have to pay but we're not done yet. I now want you to go and round up all your utility bills, maybe you can just check your bank statements to see how much goes out every month. You may not have checked this before; how much do you spend on gas, electricity, the mortgage or rent, home, contents, car and life insurance? Next, how much does it cost you to get to work each month? Finally, go find some grocery receipts. How much are you spending on food? These are the utter essentials and you have to pay for these.
You are nearly there. You might need a spread sheet? Or may be just a big old note pad. You need to check the maths. You will need to be able to cover at least the minimum payments on all of your debts, to pay the essential bills, to keep the roof over your head and now you need to brace yourself. If you want to pay off those debts................EVERYTHING else is a luxury and you can do without it. Now breathe because I'm still holding your hand. Now, you will take away one figure from the other. The total amount you have to pay out each month (Mortgage+utilities+minimum debt payment+food+transport to work=how much you have to pay out). IF there is anything left that's what goes to debt payments.
You can pick any debt, but I'd like to suggest you pick the smallest. Maybe that's your overdraft? Every month, you're going to throw every single penny you can at that one debt whilst paying the minimum on all the rest.
Remember, you've paid for everything else, the food is bought, the mortgage is paid and you can live without luxuries. Now, start to cancel anything unessential. Give notice to your mobile phone company because you can go pay as you go. Cancel the Sky TV or Virgin package because you can go Freesat. Cancel the papers, cancel the holiday, the trips and just remember..............this is temporary and you will holiday again but not just for now.
Fast forward six months. You've not spent on any credit cards, you've reduced or paid off your over draft and your credit score is improving. Now it's time to look for 0% Balance transfers. You will start to get debt savvy. You will now be making the biggest payment on that 0% each month. The minimum payment that you would have paid on that debt and every other penny you have to throw at it. Then what? Oh, you just keep going. You may have years of this, but it will be many years less that just paying the minimum payments on all your debts every month.
Whilst all this shizzle is going on every day. Know that I am holding your hand. I won't let go. I know how hard it is to say no. No I can't have a holiday, no I can't go out, no I can't have my hair done, no I can't have new clothes, no I can't buy anything for the house, no the family can't have anything either. Some of you will have to do this with your entire family. Your teenagers or toddlers are in this with you.
I also know the liberation and freedom of paying the last payment! Then and only then..........I'll release my grip and turn and say to you. We made it.
Love Froogs xxxxxxxxxxx