As I have helped people prepare hundreds of budgets, I realize that debt is sometimes hidden from people.
Let me give you an example.
One of the first things I ask when helping a person prepare a written budget is "How much is your take-home pay?
They tell me a number, and we start applying the famous equation: INCOME – OUTGO = EXACTLY ZERO
Everything is proceeding smoothly until we get to the debt column. The "revealing" of the hidden debt happens here.
The statement is made, "I have a 401(k) loan, but it is taken out of my paycheck. Should we include it here?"
The 401(k) loan is taken from their paycheck before it ever gets to them. Ever hear the saying, "Out of sight. Out of mind."?
I usually adjust the "Take-Home Pay" by the loan payment amount and then include the payment in the debt column.
Here are some common "Hidden Debts" that I see:
- 401(k) loans
- Overdraft loans
- Car payments
- Company loans
These hidden loans are "Out of sight. Out of mind." Yet they are eroding one's ability to win financially.
Expose the debts to daylight and ATTACK them!
Oh, by the way, you ought to list out all of your paycheck deductions and see how much you are paying annually for each one. When you see how much you are paying in taxes, it will ensure that you vote every single time you have the opportunity!!!
You can start your written spending plan by using one of the FREE easy-to-use forms on the TOOLS page.