Saturday, December 3, 2016

Baby Steps

As step 2 points out in the previous post, building a budget is critical to getting out of debt.  I understand that most people don't like to put a cap on spending as it limits you in so many ways, however setting aside money amounts for different things is not a bad thing.

I had to relate it to dieting, and counting calories.  I didn't count my calories, I gained weight, I kept track of what I ate, I lost weight.  Exercising is like getting a second job, it helps against having to eat less, or that donut that you want to eat.  It isn't really rocket science.

This was a huge issue for me, as I didn't want to keep track, I didn't want to say no, and especially tell my kids or my spouse they couldn't have something when they needed something.  That eventually got the better of us.  We didn't have to file for bankruptcy or have a dire need but it could have had it happen.

What changed for me?

I began listening to Dave Ramsey.  I knew all the baby steps that he talks about, but I didn't want to follow them.  Listening for a week changed me enough to realize that things needed to change. Things that impacted me:

  1. Tired of living with a debt hanging over my head, seeing more bills at the end of the paycheque.
  2. Wondering why when I was getting a raise didn't mean affording anything more.
  3. Stop worrying about getting out of debt and just get out of debt.
  4. I didn't get into debt overnight why expect to get OUT of debt overnight
  5. Big expenses would send us reeling, affecting us for months.
I really liked the simplicity of his getting out of debt plans.  
  1. Save $1000 emergency fund.
  2. Pay off the debts
    1. Cut the monthly expenses as much as possible "rice and beans"
    2. Look at ways of cutting expenses, sell the car payment, renegotiate better terms on debts, anything that will cut an expense by a couple bucks.  ( I looked, for example, at my utility payments and found another retailer that saved me $100's per year)
    3. Sell off stuff to pay those debts.
  3. Save for 3 - 6 months emergency funds.
    1. This is not investment strategy here, this is putting money aside, period.
  4. Invest for retirement
    1. Dave says 15% but if you can do more, do more.  The goal is to think a large amount that could sustain you for 30 years, with no debts.
  5. College fund for kids
  6. Pay off the house
  7. Build wealth and give.
Of course I am still on step 2, but have whittled down $50k in debt over a couple years.  He has a number of great tips on each of the steps and just listening to the show helps just change the mindset from overwhelming to achievable in a couple of weeks.

Monday, August 15, 2016

First steps I found that helped

  1. Understand that debt is not insurmountable.  There is always a way out, and it may be very long time to get out of it, but it is achievable.  It also will require time to figure a way out of it.
  2. Build a budget - don't look at the debts you owe off the bat, and build a listing of what is paid out for expenses every month.  There is more and more banks and financial websites that are offering this.  https://www.mint.com or if you are an Alberta Treasury Branch (ATB) customer, they have a tool called Trackit that can pull in your expenditures and you can record it.  Even exporting your month's bank transaction record to excel is even a start.  Pull them into categories and put totals beside them. 

This was an eye opening experience for me, saying things like  
  • "we spend that much on groceries a month!" 
  • "We spent $1000 on car payments this month!"
  • "Utilities were over $400 bucks in the summer?"
It helps get your head understanding where all the money is going before the end of the month. I will be posting the next few steps I used to get on the right track.

Why another financial based, getting out of debt blog?

I am in my very early 40's and am tired of debt.  What is debt?  Anything that is owed to another person, institution or company.  Why am I tired of it?  Well here is the story.

Over 15 years ago I recall sitting and listening to a friend of mine describe himself as doing really good and only had debt that was about 1 1/2 times his salary.  I remember sitting there thinking I can't even imagine owing so much money.  I barely made that kind of money in a year and thought how could someone be in debt that much?  Looking back I realize how naive I was as I didn't even have a budget in place, and likely I owed as much if not more in different accounts and cards.

About 9 years ago, my wife and I kept asking why is there still so much month at the end of the money? I was earning more and more money but the bills continued to go up and up.

2 more years had past and I thought I should build a budget.  So I pulled out Excel and did my best to locate a budgeting spreadsheet from their online repository and found a couple of sheets in which I started plunking figures and dollar values for "debts" and "investments" that we had.  For lack of a better word, I was absolutely shocked at how bad things were.   I was about the same amount as my friend in the start of the story in debt and that wasn't even including the mortgage!  When I looked at everything and totalled it up, there it was, the same amount years ago that I was flabbergasted about.


So I did what any bad money manager would do, and went to a family member for a loan to consolidate the debt.  And still piled on more debt from previous poor decisions that I had done.

4 years later, I am still in debt but am slowing swimming out of it.  I thought it appropriate to what I finally did to break the cycle and improve my life and stop being so stressed about this load that weighed down on me and my family every month.

Being in debt is a cycle, albeit a very long and drawn out cycle, but is a cycle, and admitting that you want to stop being in debt is the first step.