Have you ever been stuck financially? I mean STUCK. Do you feel so stuck that you can’t even gain any traction to get control of your finances?
Perhaps you have no income because you have lost your job. Maybe you are in college and accumulating debt to pay for it. Perhaps your spouse spends money faster than you make it. Or maybe you are just lost when it comes to managing money. It might even be the fact that you have so much unsecured debt that you feel that the creditors should just change the amount owed to a cool $1,000,000 because it might as well be that much! Maybe you are disabled, and can’t figure out what to do to earn more money.
If this is you, this post is for you! In this post, I will be sharing steps you can take to become “unSTUCK”.
I am FIRED UP!
Step One: Why are you stuck financially?
It is important to understand why you are stuck financially. There are some situations that have definite ends to them (college) and other situations that have indefinite ends to them (job loss, disability, and overwhelming debt).
Why are you stuck?
Write it down on paper. Right now. Write “I am stuck financially because … “.
When I encounter situations where I don’t know what to do, I start writing. Writing enables me to put all of my thoughts on paper.
After writing all of my jumbled thoughts down, I set it aside for awhile. After a day or two, I revisit what I have written and identify the repetitive thoughts. This helps me identify the core issue.
Why are you stuck or what caused you to be stuck in the past?
Step Two: Plan what you have!
Now that you have written down the reasons that you are stuck, it is time to prepare a written spending plan.
Yes, a budget. Here is something I have learned – managed money goes farther than money that isn’t managed.
I know that what you have is limited. In some cases, VERY limited. BUT, it is imperative that you plan what you do have.
We offer free budget tools on the I Was Broke. Now I’m Not. website to help you start budgeting.
If you are paid once per month, this is the budget tool for you.
If you are paid multiple times per month (twice/month, bi-weekly, bi-monthly, weekly, etc.), this is the budget tool for you.
If you want to learn how to put together a great budget, you might want to read the “How Do I Budget?” post.
Step Three: Remember the priorities!
When you have an extremely limited amount of funds, it is important to remember the priorities. I have met a lot of people who have been tricked and shamed by credit card companies into paying the credit card bill instead of the house payment.
You have completed step two and planned what you do have, so now the next step is figuring out who gets paid and who does not.
My priorities are:
House payment (or rent), basic utilities, car payment, gasoline, and food. This does NOT include cable, internet, phone, restaurants, fashion clothes, etc.
If money remains after covering the essentials, then it is time to pay for the secured debts. If secured debts are not paid, the creditor has the right to come take the item. They will usually sell it at wholesale and come after the rest from guess who? So I would pay the secured debt next.
Creditors cannot immediately come take something from you so they can be paid later if the money runs out.
This is last on the list. Besides I can have fun for free. Pickup basketball games, watching old movies, etc.
Who is the manager of YOUR money? It should be YOU! Not your creditors! YOU choose where it goes.
Even if you don’t have enough money to pay all of the bills, go ahead and put all of the bills into your spending plan. This is a KEY step! You need to clearly understand how large the gap is between your INCOME and your OUTGO.
I call this gap the “GO GET THIS” gap. That is the next step!
Step Four: Fill the “Go Get This” Gap!
I am sure that some read this as “Go work like crazy and earn more money”. I would certainly not disagree with working more and earning more! It is a GREAT way to fill in the “Go Get This” Gap.
But there are many more ways to fill in the gap! Here are quite a few.
I am a Christ-follower, and I have seen the power of prayer.
If married, ensure that your spouse is on board.
There is POWER when you work TOGETHER on your finances! How do you get a spouse on board could be a year-long series, but it is so necessary. Jenn and I work together because we wrote down all of our earning and spending. When we saw that our OUTGO exceeded our INCOME, we knew that it was a serious issue! One strategy to try is to mail the kids off to Grandma & Grandpa’s (eliminate distractions) and tell your spouse that you want to talk to them about something that you really need them to hear. Something that is really important to you. Very important to you. And then show them your family’s finances planned out on paper. When you write out where you are stuck financially it tends to reduce the emotion towards each other. You have the opportunity to become a unified in your effort!
Govern your business.
If your business is struggling, it might be worth putting some “mileposts” in place. Mileposts are points one month, three months, six months, and twelve months away. An example of a milepost is “If we are at $5,000 sales in three months, we will keep the business. If it is at $3,000, we will keep it open for three more months. If it is less than $3,000, we are going to have to shut down the business.” The hardest thing in the world for an entrepreneur is to close their business. Tough, but necessary sometimes.
Maybe your house payment is eating you alive. Sell the house. It could be time to sell the motorcycle, the boat, the truck, the swing set, the four-wheeler, or the 50″ TV. Whatever you have of value that isn’t a “need” – it may be time to part with to help.
If you’re looking to sell something online check out Episode #106 of the Monday Money Tip Podcast for tips.
Many times you can substantially lower your credit card payment just by calling them! I lowered my cable/internet bill by 75% just for calling! Get rid of the home telephone – you never use it anyway. Use cash envelopes for the categories you tend to spend impulsively (groceries, restaurants, shopping, entertainment, spending money). Call and get a new quote on your homeowner’s/auto insurance.
Chop up the credit cards!
If they are a crutch that keeps trapping you, it is time to chop them up. I chopped up my credit cards December 2002!
Make it a family effort!
There is NOTHING like a unified family. Nothing.
Pay secured debt before unsecured debt.
If you can’t pay everybody, consider paying just the secured debts. Call the unsecured companies and tell them that you will not be able to pay them this month, but that you fully intend to pay them. Tell the truth! There is power when you call someone and ask for help! They may or may not work with you, but when you are in bad shape financially you can’t pay them if you want to!
What are some other ways to fill in the “Go Get This” Gap?
I have found that a vast majority of those who sign up to attend the Financial Learning Experience are living paycheck-to-paycheck AND carrying debt. In fact, statistics from surveys I have conducted show that 72% of those attending my classes are living paycheck-to-paycheck. Of those 72% living paycheck-to-paycheck, 24% are BEHIND on payments.
Only 3% felt that they are doing well financially.
This is a NATIONAL problem. No matter where I go, I see the trappings of debt – marriages failing, stress, depression, and hopelessness. And all of this is happening in one of the wealthiest countries on the planet! This is entirely unacceptable!
So, as part of my crusade to help America become debt-free, I am going to share the process I followed to become debt-free.
Before I get started, I want to ask you these questions.
- Would you join me in my crusade?
- Would you share this with others?
- Would you commit to become debt-free?
I WANT YOU TO BECOME DEBT-FREE!!! It changes your life! It enables you accomplish far more than you ever thought possible with your personal finances! It allows you to go do exactly what you were put on earth to do – regardless of the income!
Step 1 – Understand WHY you want to be debt-free!
I believe this is the most important step in becoming debt-free! In the hundreds of financial counseling sessions I have held, it is amazing how many people do not have a plan for their lives.
I ask them, “Why do you want to win with your money?” and they stare at me like I am from outer-space.
“Why?” they stammer back at me.
Seriously, I believe that it is the first time that many of these people have ever seriously thought about what they want to accomplish with their lives. As a result, they are bumbling through life just “trying to make it through the day”.
What a miserable way to live!
I cannot overstate this fact – IF YOU AIM AT NOTHING, YOU WILL HIT IT EVERY SINGLE TIME!
Write out your hopes and dreams.
When Jenn and I wrote down our hopes and dreams on paper it opened our eyes to the fact that our money management (or lack of) was literally ROBBING us of our future! We wanted to move back to Anderson, SC to take a job that paid way less than what we were making, but every single dinner at Outback was robbing us of that opportunity. Every single debt payment went off to make the bank wealthy while at the same time robbing us of our God-given dreams!
That made me MAD! It made me FURIOUS! It made me realize how incredibly STUPID I was to be managing our money so crazily! I had $755 PER MONTH going out to pay car debt, credit card debt, and student loan debt. Add in the stupid house payment, and I had over $1,700 per month running off to make the bank wealthy!
By writing out our hopes/dreams on paper, Jenn and I were motivated to manage our money differently. It caused us to view debt differently.
Are you ready to get rid of your debt?
Take your first step today by print out THIS FORM and filling out your own hopes/dreams. If you are married, you need to do this separately and then take time to discuss it with each other.
By the way, one of my hopes/dreams is for you to become debt-free!
What has kept you from attacking your debt?
Step 2 – List your debts.
During financial counseling sessions, it is a guarantee for any person who has debt that I will calculate their debt freedom date. You should see people’s reactions as I put together a list of their debt! Their reactions relay to me the true facts of debt. Here are some very common reactions that I see or hear.
- Hiding their eyes
- “Oh no!”
- “I’ve never added it up.”
- “This is scary.”
- Moving to a defensive position as if to guard themselves against the debt
- Turn their head so they don’t have to look at the debt total
I KNOW that it can be scary to total up debt. The mere fact that it is so scary tells me two things:
1. People do not like debt.
2. People have not been paying attention to their finances and do not have a well-defined plan for their life. Otherwise, they would not have incurred most of the debt. It is literally ROBBING them of their financial future!
Here is what I say to them – “If you don’t know how many heads the dragon has or how large the dragon is, how can you effectively defeat it?”
It is time to slay the dragon. Use THIS FORM to prepare a well-organized list of your debt.
Why is it so scary to total up debt?
Step 3 – Calculate your debt-freedom date.
It is really very simple to calculate your Debt Freedom Date. You need two numbers to calculate your Debt Freedom Date – Total Debt Owed and Total Monthly Payments. I pretend that there is actually only one debt – with one big balance and one big monthly payment.
Look at the sample debt list below. This family will be debt-free in just 33 months!
In the TOOLS section, there is a free tool called the Debt Freedom Date Calculator. If you enter your debts and monthly payments into this tool, it will calculate your Debt Freedom Date for you! If you don’t have Microsoft Excel, click HERE for a web-friendly version.
How many months until you are debt-free?
Step 4 – Establish accountability to become debt-free.
The strongest among us can still fall to temptation! You could be making fantastic progress toward debt-freedom and then a new truck pulling a new boat passes you on the road. If you are not careful, you will also be pulling a new truck and boat down the road!
There are two key ways to ensure you are held accountable to your goal of debt-freedom!
If married, work together with your spouse. If unmarried, have someone you trust (someone who has won with their money) hold you accountable!
There is incredible power when you work together with your spouse toward debt-freedom! It is a common goal that will unify your marriage and cements your commitment to managing your resources together.
I have also found that when I have a bad case of the “I Wants” and “I Gotta-Have” Jenn does not. She shuts me down! Then, when Jenn gets a bad case of “I Really Want This” I do not. I shut her down! Why? Because we are not doing debt! We are THROUGH with it!!!
Plan your spending every single month!
Planned money goes farther than unplanned money! Every single month Jenn and I sit down TOGETHER and spend every single dollar on paper before we are paid. Don’t miss that – that was good! Every. Dollar. On. Paper. BEFORE. We. Are. Paid.
From the day that Jenn and I started budgeting, we have not incurred any new debt. In fact, we became debt-free (minus the house) in just 14 months!
I can tell you this. I HATED the idea of budgeting and now all I do is yell from the mountaintops about how important it is and how EZ it is to budget! There are FREE budget forms that are available HERE. Use one of them to start your journey to debt freedom!
Your budget will hold you accountable. I wouldn’t be surprised if it helped you free up $200 – $500 per month to attack your debt even harder. It did for me!
If you’re already debt-free, how did accountability help you stick to your debt-freedom plan?
Step 5 – Secure your debt-freedom.
Save at least $1,000 before attacking your debt!
I have seen so many people calculate their Debt Freedom Date and get all fired up about attacking their debt. They sell everything and everyone in sight. They can’t shut up about getting out of debt. It is all they talk about with their spouse. They have even sold their Clay Aiken AND Celine Dion albums!
Everything goes great for two months. They smile every time I see them. “This is awesome”, they tell me enthusiastically.
Five months later, they avoid me. When I ask them what is up, they say something like, “Well, Johnny broke his arm and the emergency room bill and doctor bills cost me $1,500. I had no savings so now I am right back where I was – falling back into more debt.”
How demoralizing is it to attack debt so fervently and then have to go right back into debt? It is AWFUL! Don’t do that! Instead, save up at least $1,000 into an emergency fund before attacking your debt and THEN you can attack your debt all you want!
What happens if you have an emergency pop up while you are attacking your debt? You can use the emergency fund to cover the expense. To replenish the emergency fund, slow down on the debt pay-off plan until you have the $1,000 back in the emergency fund!
By the way, if you have a house, kids, or more than one car I highly recommend $2,500 for your emergency fund.
Secure your debt freedom plan with your emergency fund!
Congratulations! You now know the process that Jenn and I used to become and STAY debt-free! You are now equipped!
What are you going to do now that you are equipped to become debt-free?
You can be debt-free!
I want to equip you to become debt-free! Jenn and I became debt-free in 14 months by following this process, and I can tell you this – there is NOTHING like living life without the trappings of debt!
Let’s review the steps to debt freedom.
Step 1 – Understand WHY you want to become debt-free! You greatly improve your chances of becoming debt-free when you understand the reasons that you are making sacrifices in lifestyle!
Step 2 – List your debts. If you don’t know how large the giant is, it makes it really difficult to understand the overall situation!
Step 3 – Calculate your Debt Freedom Date. When you have put together your Debt Freedom Date calculation, print it out! Put it on the refrigerator! As you pay off each debt, draw a big line through it! You will not believe the conversation this will start with your family and friends as they come over to visit.
Step 4 – Establish Accountability. If married, hold each other accountable. If unmarried, have someone who has won with their own money and has your best interest in mind.
Step 5 – Secure Your Debt Freedom. Before attacking your debt save at least $1,000, or $2,500 if you’re married with children, so you have an emergency fund.
I hope that you have taken the time to write out your plans, hopes, and dreams for your life. Knowing these will help you stay the course. It will motivate you to say no now so you can win later!
Happy Monday! It’s a great day because another episode of the Monday Money Tip Podcast is LIVE! In this episode, we’re talking about debt, specifically, is all debt equal. We’ll discuss the different types of debt and break down what kind of debt you should avoid and if there is any debt that is ok to have. Everyone has a different opinion, so we’re breaking it down for you. In our Current Money Events segment, we’re sharing the updated contribution limits to your retirement accounts and other tax-advantaged investment accounts. Our success story comes from David, who is almost halfway up rung #4 of the I Was Broke. Now I’m Not. Ladder!
Find more episodes of the Monday Money Tip Podcast HERE. Please let us know what you think by leaving us a rating!
Email firstname.lastname@example.org to ask questions or share success stories.
About the Episode:
- Today, we’re answering: “I want to hear your thoughts on debt. Dave Ramsey says, “NO!” to all debt – except for maybe a house. Others say, “Use other people’s money.” I’m so confused. Help!”
- In our Current Money Events segment, we’re sharing the updated contribution limits to your retirement accounts and other tax-advantaged investment accounts.
- Our success story comes from David, who is almost halfway up rung #4 of the I Was Broke. Now I’m Not. Ladder!
I Was Broke. Now I’m Not. Participant Kit + FREE Access to Online Study
I Was Broke. Now I’m Not. Group Study DVD
0% Balance Transfer Credit Cards
Article – IRS Retirement Plan Contributions
Article – IRS Internal Revenue Bulletin
Next Step: Debt
Another episode of the Monday Money Tip Podcast is LIVE! In today’s episode, we’re talking about the U.S. National Debt. Over the years, this debt has continued to increase. Today, we’re discussing what we can do to begin to lower this number. In our Current Money Events segment of the podcast, we’ll discuss personal debt. In addition, we will share a success story from an individual who is now debt free, including their mortgage!
It’s our goal at the end of each episode that you gain hope and encouragement in your financial journey, you’re equipped to take the next step, and that you’ve had FUN with us!
Find the Monday Money Tip Podcast HERE. Please let us know what you think by leaving us a rating!
Email email@example.com to ask questions or share success stories.
About the Episode:
- Today, we’re discussing the US National Debt and how we can begin to lower this increasing debt.
- In our Current Money Events segment, we will discuss personal debt.
- Hear a success story from an individual who is now debt free, including their mortgage!
Quote of the Day: “We don’t have a trillion-dollar debt because we haven’t taxed enough; we have a trillion-dollar debt because we spend too much.” – Ronald Reagan
Are you ready to pay off some serious debt in 2019? To say “goodbye” to the car payment, Sallie Mae and credit cards? If you said yes, the Debt Freedom Date Calculator found HERE on our website can really help you. This tool combined with the Debt Snowball Technique is how I became debt free and you can too!
Step One: Identify All Debts Owed (Lender, Amount Owed, Monthly Payment)
Make sure you list out all of the debts that you owe and how much each one is. You can check your credit report just to double check that you have no outstanding debts that you may have forgotten about.
Step Two: Sort Debts By Amount Owed (Smallest to Largest)
List your debts out by sorting the debts from smallest to largest by the amount owed. Make sure you have sorted by the amount owed and not the payment amount.
Step Three: Pay Minimum Payments on All Debts, Except The Smallest Debt
Make the minimum payment on all of the debts except the smallest one. It can be very tempting to start to attack your credit card bills or car payment but if that is not the smallest amount you owe, make minimum payments for now.
Step Four: Apply Any Extra Money to Smallest Debt
If you have leftover money in your budget, apply that to the smallest debt that you owe. The quicker you can see a victory, the more effective this technique will be!
Step Five: When Smallest Debt is Eliminated, Add Its Monthly Payment to Next Smallest Debt
Once you have paid off the smallest debt, take the payment you were allocating towards it, and apply it to your next smallest debt. That way, as you pay off more and more debts, you’re creating a debt snowball!
If you would like more information on this topic, check out this quick YouTube video HERE where I explain the technique and give visual examples.
Want more tips like this one? Subscribe to the Monday Money Tip Podcast HERE.