When I was looking to build my credit as a teenager and securing my first credit card, like everyone else I never stopped to realize the limitations of debt I would be placing on my life. Its true, if I knew then what I know now – I would probably never wanted to build my credit, at least in that fashion. I may have stopped and given it more thought.
Understanding the Truth About Debt
The truth as I have come to learn about debt is that it is NOT added income available to spend. Sometimes I think we get a card and see it as added funds to our budget. The fact is, IT IS NOT! When I got that first credit card I thought “WOW!” thinking I had more funds to get things with. Debt is future money with interest – YOUR MONEY less interest. We see our neighbors showing off their new fancy car and think, “Gee, I can use one too – this clunker is older than dirt!” So you traipse off looking for a new car to keep up with your neighbor and come back with a new one ON CREDIT.
You are not your neighbor, and they may have saved up for that fancy car and paid CASH for it. They could own that car outright, and because you feel you deserve the same – your new car is not yours, not until you have made all the payments with interest.
When you realize the importance of a budget over accruing more expenses using credit – you can begin to see, the wealthy people know how to manage their money with a budget. Talking about your finances and having a budget is the only way to go for the wise budgeteer.
BUDGETING SAVES!! Budgets allow you to HAVE more and get the most from your income. Now let’s see how much debt you owe.
Listing All Your Debts
On the Simplified Budget Worksheet I provided you, lets move to the bottom third of expenses and list ALL your credit cards, loans, and anyone you still owe. This will show you how much less your net worth is. Use a separate sheet, and then transfer them to the worksheet with the lowest balance FIRST under the “BUDGET” column. Once done, tally up your debts.
Now go back to your statements to find the minimum due this month on each and list it under the payment category.
Snowballing Your Payments
This is the best method in eliminating debt, but it takes time. One by one you will witness them falling off your financial grid increasing your payment to the next one on the list, until they are all gone. You possibly could through more money into your smallest debt on the list and pay it down a little or best yet, pay it off and cut up the card. But wait, we have one more area to look at tomorrow to find out if that is possible.
Imagine the Day You Have NO MORE DEBT PAYMENTS….
This is my ultimate goal waking up one day, after paying all my essential bills for the month having $300 – 500.00 with no place to go but my Savings. I could then build my savings for those rainy days – $500 a month free to save is $6,000 a year.
Tomorrow we will look at the other bills left in the pill and see what really is necessary as a non-essential bill, and what is. Then you will know how much you can afford to apply as an extra payment to the first debt on your list.
Please share your thoughts and opinions so far? Does it make sense? Anything I can add to make it better. I look forward to your comments and opinions below.