Do you feel overwhelmed because of your financial situation? Are you behind on bills? Barely making bills every week or feeling like you make too much to have nothing at the end of the month? Do you have a goal in 2014 to get out of debt? You’ve come to the right place! I can teach you how to get control of your finances and get out of debt using techniques learned from Dave Ramsey.
First, Take a deep breath. Its going to be okay! Now think, where are you spending your money? Write down all of the things you can think of, then check your bank account to make sure you didn’t forget something. I then totaled everything for 12 months to see my annual expenses. This first step is to help you realize how much you are actually spending vs how much you’re making! This might have made you realize that you’re either spending too much or you’re making too little, or both. Are you seeing where you need to focus more of your energy? Good.
Second, create a budget by using your list of expenses. Or use this one from Dave’s site, it faster/easier and it has everything you can think of! Then compare it to how much you’re making. The difference is going to be the amount of leverage you’ll have to build up savings and get out of debt (provided you’re living on basic needs only.) Don’t despair! This is where it gets good! One of the hardest thing for most people is as their diligently trying to pay down debt the have an emergency. You know: a car breaks down, the dishwasher needs to be replaced, the kids new school clothes, broken bones, a killer sale on those jeans :), etc. So what do we do? We put it on a CREDIT CARD because it was an emergency! So the best thing to do moving forward is to have an “emergency fund” I suggest it start at $1,000 and go as high as $5,000 depending on your income, situation and comfort level. This money will simply sit in a savings account and will NEVER come out except for emergencies.
Now when you have $1,000-$5,000 in savings it really makes you think about what an emergency really is. Can you see the needs vs. wants on my list above? Interesting right! So as you plan your budget you plan on things you’ll need i.e.: New school clothes and jeans 🙂
Thirdly, how to build this emergency fund. You stop paying any extra on bills and you focus 100% of any extra income on building this fund. Don’t worry about interest or any of those things right now, just pay minimums and cut a few things out of your lifestyle. It may sound extreme but to will have to sacrifice to build up this fund. Less diet coke runs, eating out, going to the movies, mall shopping trips, etc are the fastest way I know to squeeze out a little extra cash to build this up quickly. In a few weeks or months your emergency fund will be fully funded and you’ll be able to focus on the next step: Paying off all of your debt ASAP!