Working Together To Win With Money
When my wife, Jenn, and I began our budgeting journey, we discovered a magical ingredient for achieving financial success: working together. I want to share the benefits we’ve enjoyed since we started “working together to win with money.”
Benefit #1 – We BOTH know our financial situation.
Before Jenn and I started working together on our finances, there were a lot of episodes of unplanned spending. As a result, we would run short of cash at the end of the month and cover those shortages with credit cards. Because neither or us truly understood where all of our money was going, it led to additional financial mistakes. These would lead to unnecessary stress and frustration.
It also resulted in an average bank account balance of $4.13. Since I am an eternal optimist, I would say, “Hey! At least the balance is positive and not negative!”
We later realized our financial behavior was robbing us of our future hopes, plans, and dreams. In December 2002, we had our IHHE Moment (I Have Had Enough Moment) and said, “ENOUGH,” and stopped spending money in a wild manner. By July 2003, we had formalized our spending into a monthly spending plan (A.K.A. a budget). Ever since then, we have planned each month’s spending.
The result? We have been debt-free (except the house) since February 2004. We have achieved many of our life dreams, and we both know our financial situation.
Keys To Obtaining Benefit #1
- Prepare a written spending plan every single month – visit HERE for a free budget template and check out this post “How Do I Budget?”
- This monthly rhythm will create a natural space for you to have conversation about your finances. Since nearly everything in life costs money, it will allow you to have a conversation about the more important things of life too. This is perhaps the most powerful result of preparing and following a monthly budget.
- If you have a financial mess, it is time to have an IHHE Moment
- This is the moment where you say, “Enough is enough.” It is a definitive moment where the pain of keeping things the same exceeds the pain of changing. This is a vital component of every financial turnaround as it provides energy and passion to help you power through the challenges of changing old financial habits and behavior.
- Take the time to talk with your spouse about your hopes, plans, and dreams – and write them down!
- At least once a year, you should have a focused conversation on your plans hopes and dreams. The dreams you share as well as your individual ones. This can be a wonderful time of hope and challenge that helps you remain committed to positive financial decisions.
Benefit #2 – Improved communication.
When Jenn and I were B-R-O-K-E and constantly spending money we did not have, we really had no idea where our money was going. All we knew was this: it was leaving at a very rapid pace!
By working together to win with money, our communication changed dramatically. I now know when each of my nephews and nieces have a birthday because we send them money. We can’t just magically produce the money we send them every birthday. It must be planned. Through this rhythm of monthly meetings, these gifts are carefully included into our monthly spending plan while also having a wonderful conversation about each beloved family member who is turning another year older.
We also discuss our future plans, hopes, and dreams. We talk about which dreams will be funded now and which ones will need to be funded later. Together we made a decision to fund college education for our three children. We fund that education every single month. In January 2003, we agreed together that this goal was extremely important to us, and we made it a priority.
We both have a desire to travel around the world. As such, we made a decision that most of these travels will be funded in the future, not now. However, we have focused on funding a few trips right away. We typically take a family vacation each summer where we tour several states and visit family. Living in South Carolina, we also love visiting the beach. Because of this, we have made beach trips a priority. These trips are funded monthly because they are included as an expense in our monthly budget. This allows us to pay cash for each trip without any debt following us home. This all happens because of one key reason: we have agreed together to sacrifice other items in order to fund each of these higher priority goals.
Because of our improved communication, we have been able to give more money to causes and people we believe in.
To put it very plainly: there is no possible way we are ever going back to our old way of money (mis)management. Our marriage has been vastly improved by the fact that we are working together to win with our money.
Keys to Obtaining Benefit #2
- Understand each other’s plans, hopes, and dreams.
- Few things are as satisfying as setting a goal and achieving it with the one you love. Have you written down your plans, hopes, and dreams? What about your spouse? How long has it been since you allowed yourself to dream?
- Take time to develop a written spending plan TOGETHER – free budget tools are located HERE
- Let’s face it. Budgeting is not the most exciting task you will undertake on any given day. However, when you realize that your budget, and the process of preparing it together with your spouse, is the critical and vital tool that will maximize every dollar and enable you to achieve the huge plans, hopes, and dreams of your life, you might discover that you suddenly enjoy this process in a way you did not think was possible. You will be spending your time working together to win with money
- Plan your spending EVERY SINGLE MONTH – ensure that you are funding at least one of your dreams at all times
- Have you noticed how fast time goes by? My firstborn was just entering kindergarten and now high school is already in her rear-view mirror! If you do not commit to preparing and following a budget each month, you will seemingly blink and a year (or more) will pass. Mark my words, any month you allow to pass without preparing a plan is a month you did not maximize the impact of your money.
- Become debt free – calculate your Debt Freedom Date HERE and check out this post to learn more about how “You Can Be Debt-Free”
- Have you ever known anyone who said their credit card debt was the reason for their financial success? Probably not. The same can be surely be said for furniture debt, student loan debt, and owing a friend or family member. We all understand that debt is not all created equal. Credit card debt is wildly different from a home mortgage. But consider this thought: What would your life look like if you owed zero debt except your home? What if you were completely debt-free – including your home?
Benefit #3 – Dreams Get Funded!
By working together to win with money, many of our dreams have been funded.
We have had tons of dreams … A new kitchen with granite counter tops, a new master bathroom, paying for our kids’ college education, paying cash for our kids’ first house, giving away $1,000,000, starting a university, living for a year in downtown Chicago, traveling to Australia, Europe, and Asia, owning a 100 acre farm …
Quite frankly, the list of dreams goes on and on. However, because we have talked about them and prioritized them, many of them have been fully funded. In fact, it is my belief that one hundred percent of the above goals will be funded during our lifetime. Why do I believe that? Because we have funded so many of our dreams already! Many of them were dreams we did not think were really possible when we first discussed them. It is amazing what happens when you have a financial plan and work together to win with money.
If we fail to achieve all of our dreams, so be it. It will be a blast knowing we gave our best effort together!
Keys to Obtaining Benefit #3
- Remove all distractions and take the time to have a great conversation about your plans, hopes, and dreams.
- Children are wonderful and beautiful, but there are some conversations that are better without their constant input (or interruption). One of these includes the conversation about your plans, hopes, and dreams. Schedule your conversation so you can ensure a distraction-free environment for this most important of discussions. For example, Jenn and I scheduled a three-day getaway to Charleston, SC to update our plans, hopes, and dreams. It was a wonderful time and we came back with a new perspective and dreams.
- Ask these questions of each other:
- Will these dreams cost money? How much?
- If we continue to manage money the way we are right now, will we be able to achieve these dreams?
- What is your most important dream? How can we start funding it right now?
How Working Together Has Helped Us
Ever since our IHHE Moment back in December 2002, Jenn and I have taken our financial decisions much more seriously. The addition of a budget greatly accelerated our financial success. By February 2004 (just 14 months later), we were debt-free except for our home. We have been able to launch and purchase eight companies, acquire the farm, and invest in rental real estate. At this moment, our oldest daughter is nearing completion of her college journey – with zero debt. We are so grateful for the journey and the blessings we have experienced. It is our mission and goal for you to enjoy the same success. We truly believe it is possible for you to live your own Fully Funded Life! You can do this! We believe in you.
After more than 25 years of managing money, I finally took time to write about the profound impact that one’s plans, hopes, and dreams can have on your financial behavior. I have entitled the book, 20/20 Money: Gaining Clarity for Your Financial Future. Included within this book are 22 Vital Questions you should ask to help discern and fully understand your own plans, hopes, and dreams and just exactly a Fully Funded Life looks like for you. You can learn more and pick up your copy HERE.
Setting Financial Goals
I am passionate about helping others accomplish far more than they ever thought possible with their personal finances. I know that the number one way that folks will win with their personal finances is to have a well-written plan and clearly defined goals. Setting financial goals will help you stick to your budget, and ultimately win with your money!
Step 1: Write Down Your Financial Goals
I once read this Chinese Proverb – “The faintest ink is sharper and longer lasting that the brightest mind.” That is so true! When I write down something, I am much more likely to recall it!
Here are some things that can help stimulate your goal writing.
- My book 20/20 Money is about funding your dreams. It helps you explore what your plans, hopes and dreams are. Then I help you figure out ways to fund your dreams beyond your regular income. Pick up a copy from the IWBNIN store.
- If you use Microsoft Money or Quicken, print out an Income & Spending Report for the past year. What needs changed? What should be continued? What should be done even more?
- Is there something in your finances that is REALLY bothering you? Many people have one thing that really bothers them. What is necessary to make it stop bothering you?
Write down your financial goals. We offer a FREE TOOL to help you do just this! You can download a copy of the Financial Yearly Goals sheet [HERE]. Why not do it right now? You don’t have to wait for the new year. In ten minutes or less, you can have your financial goals written down on paper!
Step 2: Put A Completion Date Next To Each Goal
“Fail to plan. Plan to fail.” A plan is not complete without assigning a completion date next to it. This date will help hold you accountable to yourself!
Here are some questions to ask yourself as you look over the goals you have written down and assign expected completion dates.
- If you are married, are you and your spouse on the same page with these financial goals? If you are not on the same page, this will be VERY difficult!
- Do any goals rely on another to be completed first? (For example, if you are paying off two credit cards – does one need to be paid off before the other?)
- Are the goals mildly realistic? Ridiculous goals tend to demotivate and demoralize. Make sure the goal has a good fighting chance of being accomplished! On the other end of the scale, don’t be too easy. Be sure to stretch yourself some!
- Are any goals higher in priority than others? If so, be sure that they are identified as such!
Step 3: Remember Your Financial Goals
There have been times that I have placed my goals in a drawer. This is NOT good! Here are some tips for ensuring your goals are kept in front of you through the year.
- Schedule a task or reminder on your email or phone calendar that will give you an alarm on the date that the goal is expected to be completed.
- Schedule another that beforehand that’s titled – “Review your Financial Goals.” This is REALLY EFFECTIVE if you actually include your Financial Goals on the reminder. That way, the excuse of “I don’t have my goal list with me” is totally removed!
- Place the goal list in front of you at work or on the refrigerator. Place it somewhere that is very visual and will be seen often!
- Tell others about your goals! That is great accountability!
- Start a blog and share your goals with the world! People like Jonathan at My Money Blog and the lazy man at Lazy Man and Money are sharing their personal financial picture with the world! It makes me wildly uncomfortable to see their net worth, but I can’t stop reading their blog!
Step 4: Establish Accountability
You are doing great! You have written down your goals, established a target completion date for each and set up ways to remind yourself of them. Now comes the really hard part … accomplishing the goals!
I have found that there is nothing so effective as personal accountability to ensure that a goal is accomplished. Who is in your life that you really trust and wants to see you achieve your goals? If you are married, your spouse should certainly hold you accountable! If you are not married, who could you ask to hold you accountable? Married or not, it is very effective to ask those you love and trust the most to hold you accountable.
I have a friend who holds me accountable to my financial goals. About once a quarter, he contacts me to see how I am progressing toward the goal. I would hate it if he called and I have made no progress! It helps me stay focused!
You may have different people hold you accountable for different goals. For instance I’ve had a person hold me accountable for my stock investment goals and another for my real estate goals.
Why don’t you take some time right now to determine WHO will hold you accountable for each of your written goals?
Step 5: Take Action!!
I have a quote that I say regularly. It came to me after having been caught in one too many horrible, pointless, useless meetings!
“Thoughts and talk without action are mere babble!”
Enough of the planning. Enough of the talking. It is time to make it happen! Nothing moves until it is shoved. Attack the goal.
It is TIME! What can you do right now to achieve one of your financial goals? Perhaps you can start off you can accomplish one this month!
Call and set up the appointment with an investment broker. Go ahead and get the new insurance quotes. Chop up the credit cards. Close the credit card accounts. Sell the truck. Go to the TOOLS page and put together your first-ever INCOME – OUTGO = EXACTLY ZERO budget!
I end this post with a great quote from Will Rogers …
“Even if you’re on the right track, you’ll get run over if you just sit there.”
– Will Rogers
Are You Stuck Financially?
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?
Get Your Finances Organized!
It is extremely important to have your finances organized. In fact, I believe that lack of organization is one of the top reasons that people do not reach the peak of their financial potential. I am excited about this post, especially because we have a FREE tool to help!
Some of you may hear the word organize and your heart flutters with excitement, while others are probably filled with dread just by the sound of the word. Wherever you are on the spectrum, you can and NEED to get your finances organized. For your own sake, and for the sake of those you love.
Step One Understand why you are doing this in the first place
Let’s face it – we are all extremely busy. The last thing we need to do is initiate another paperwork process just for the sake of what “might” happen. I believe, however, that this process is an extremely valuable step toward maximizing one’s financial potential. If you take the time to complete the steps in this post, you will discover areas where your financial plan is lacking AND also where you are winning (which is very satisfying to see).
Here are some reasons to get organized financially:
- Control: It is hard for the finances to run out of control when you are focusing this intently on your financial affairs.
- Improved financial focus: We tend to improve that which we focus our attention on.
- We WILL die some day: Our family will appreciate a clearly organized set of financial affairs.
Organization and a great financial plan are two of the keys to the reason that Jenn and I have been able to experience financial freedom!
Step Two Prepare a list of all of your financial accounts
If you are a slightly, or very disorganized person (like I used to be!), this is probably going to be the most difficult part of the entire organizational process. It is important to gather together your financial statements so you can easily prepare a one or two page document that details your entire financial picture.
To speed up the process, we are PUMPED to provide a FREE TOOL for you to consolidate all of your information in one place – our Financial Accounts Form. You can download a copy from our Organizational Tools page on the IWB website.
Below is a sample of how the information can be written into the file.
Step Three Information to include on your Financial Accounts Form
This form is meant to be the be-all to end-all location for your entire financial picture. When you are looking for key financial information, you won’t have to go far because it is all contained within this file. When you pass away, it allows your estate executor to easily understand what they are dealing with.
Here are the key items to include in your Financial Accounts Form.
Include your 401(k), 403(b), 457, TSP, Roth IRA, IRA, stock, bond, and mutual fund investments.
Include checking, savings, money market, CDs, and any other accounts held at a bank or credit union.
If you own real estate, be sure to list the addresses and the financial status of these holdings.
According to Bankrate.com, 58% of Americans do not have a written will. Have one, and include it’s location and your assigned executor on this document.
Power of Attorney
Healthcare POA, Limited POA, or other legal assignments of responsibility should be included in this document.
Include life insurance – be sure to include policies provided through your workplace. Also include insurance on key possessions owned.
Jewelry (or other valuables)
If you have valuable possessions, be sure to list them and their locations.
Safe Deposit Box
If you have one, indicate it on this document and include its location!
I know. I know. This can seem overwhelming, but it is absolutely worth the effort to put this together!
Step Four Make sure you are budgeting
Having your accounts listed out and your financial affairs in order is so important. What good does that do you though if you aren’t organized with the money that you spend?
Budgeting is another important step to making sure you are financially organized. If you haven’t started budgeting yet I suggest you check out my post “How Do I Budget?” It’s chalk full of tips on getting started along with free tools to make it easier for you.
Budgeting is part of being organized with the money that comes in and what goes out of your account each month. Taking control of this sets you up for financial success.
Step Five Where to Find Free or Cheap Resources
- Check your local hospital for free healthcare power of attorney forms.
For instance, our county hospital provides links to South Carolina’s free power of attorney form. Check your local hospital system’s website to see if they have the same available. They may also offer advanced directives. An advanced directives form takes the pressure off of your loved ones to make care decisions for you if you aren’t able to communicate your desires yourself.
- Some county library websites will also offer free legal forms, including those that are state specific.
- Several free legal documents (including power of attorney and a basic will) are located HERE
If you have substantial assets (including sizable term life insurance policies), I highly recommend that you meet with an attorney to have them review your documents to make sure everything is well organized and accurate. It may cost you up front, however it will give you peace of mind and save your loved ones in the long run.
Where else have you found great free (or cheap) legal documents?
Get Your Finances Organized!
Those Type A people reading this are probably chomping at the bit to get this done (if they haven’t already started). However, I know this may not be everyone’s idea of fun. Don’t delay though!
My hope is that as you’ve seen the benefits of having your finances organized it will keep you motivated to see it through. Getting organized may seem like a daunting task, but you should feel better equipped for it now.
As you organize your accounts and records not only will it help your loved ones in the long run, but it will become easier for you to understand your current financial position. This will help you as you make monthly decisions in your budget and set you up for success with your finances.
This may be a time consuming task your first go round, but after you have this set up it will be easy to update and maintain it going forward.
You Can Be Debt-Free
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!