get out of debt embrace reality

October 6th, 2008

Get Out Of Debt – Embrace Reality

Reality can be a scary thing.

When we started seriously trying to get out of debt, one of the first things we needed to do was really figure out how much of a mess we were in.  We had to look at our actual debts and their amounts, what we actually spent each month, and try to reconcile all that with the money we had coming in.  I’m almost embarrassed to admit that when we decided to really get serious about this, I honestly had no idea how much we owed in student loans and only a vague guess as to the interest rates we were paying.

I just knew what the minimum payments were, and that we’d be paying them for a long time yet.

You may be visiting this blog today for the first time, or the thousandth time, or somewhere in between.  As the state of the economy strikes more and more unrest and fear in the heart of the average person, I’ve seen a big upswing in visitors who find my blog by searching for something relating to getting out of debt.  And then yesterday one of my very dear friends talked to me about her desire to get out of debt, and what she could do to improve things and get rid of her debt for good.  So I thought today was a great chance to talk about the first steps in getting out of debt and turning your financial life around.  Once you’ve realized something has to give, here are some ideas on how to move forward and start making a difference.  Facing reality and being ready to move forward can be summed up, for me into two basic steps:  Where you are and How to improve it.

1.  Figure out where you are.

  • Make a list of EVERYTHING you owe. All your debts. You can ignore the house (first mortgage) if you choose to after you list it, but put it there.
  • Keep track of EVERYTHING you spend for an entire month. Everything. And everything that comes in on the income side as well.  Don’t leave out incidentals, list everything.  From the stop for lunch to the insurance payment to the school pictures for your kids, keep track of every single penny.
  • You can’t get anywhere if you don’t know where you’re starting from.

2.  Figure out how to improve it.

  • Create a budget. Budgets are hard to do at first, but it is really key. It may take adjusting and changing over time, but it needs to be at least tried. I like (the free downloadable spreadsheet part) to create it, but you can even just do it on a piece of paper. THEN, you look at what comes in, what goes out, cut what goes out that you can (don’t go insanely crazy but also, be kind of hard on yourself and see what you can do), and revise your budget. Make it as tight as comfortable, and then –
  • Everything left over goes to debt. All the extra money goes to debt. Pick the debt you target first (from your list), pay minimum on everything else, and SMACK DOWN the target debt.  You can determine which debt to target first by considering the different snowball plans, which was popularized by Dave Ramsey.  Whatever order you choose, keep paying everything extra you can to the target debt.  You can save them up in little increments, known as snowflakes – every little bit counts.

Hopefully, facing reality will spur you into action and start you on the road to debt freedom.  Don’t be discouraged by the situation you’re in – it can be scary, daunting, even sickening at times – but by facing reality you’ve taken the first step towards improving it.  You can’t get where you’re going if you don’t know where you are.

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14 Responses to “Get Out Of Debt – Embrace Reality”

  1. Good post with practical advice. These first crucial steps can often help to get us out of a situation where we feel powerless. By taking action, even if it is just small steps at first, you will be empowering yourself. Once you begin to see progress, each step will become easier.

  2. This is awesome. Thank you for a good starting point!

  3. DH and I are just starting to realize the need for a budget in order to get out of debt and on the right track with our finances. What advice can you offer a self-employed single-income family? DH owns/runs a construction company which has suffered this year from the slow housing market. Last year he brought in about $55,000 but this year (since Jan.) it’s only been about $15,000. How do we create a budget? I don’t even know where to begin. We never know when we are going to have a paycheck… it may be tomorrow, it may not be for another 6 months.

  4. Awesome Post PaidTwice and Thanks for all your advice and help –
    Signed: One of Your Very Dear Friends ;)

  5. I’m in somewhat the same situation as Birdie…I get a small retirement benefit monthly that pays my rent and basic bills, and I also have contract work that is sporadic…some months $600 and some months I have no work. I don’t spend on anything beyond rent, bills, my loan, food and gas…that’s my budget… and some months I have to use savings to make ends meet. With costs of living rising and income static, it’s tough!

  6. Good post, with the current times it is time for US citizens to get in control of their spending. The country is making more than ever before and not even coming close to saving the most.

  7. The other thing about your budget when your income is variable is how to make it fit when your budgeted expenses exceed the minimum amount you may get during certain months.

    Usually, if your outgo exceeds your income the advice is to cut things down or out until the 2 balance. So, get rid of cable, cancel the paper, etc. But in some cases you may only be short a few times per year and the rest of the time you actually make more than you budgeted for when you included those items. (Ideally, you’d use all the extra money to pay down debt during the good months.)

    It doesn’t seem sensible to cancel your cable (if it’s the only entertainment you have most of the time) when you have a short month and then start it up again when you get a good cheque. And it’s unnecessarily cheap to deny yourself something the whole family enjoys during all the months you can afford it, just because you might have 2 or 3 months per year when you’ll be short.

    Any good ideas for how to deal with that?

  8. I had variable income as a dairy farmer. I found it made more sense to budget for the year, and then run the checkbook according to the leanest month (income)we would have, and the most expensive month we would have (winter feed). Whatever was excess income for a month was went into savings for the lean income and high expense months.

    In otherwords, figure out the worst scenario of least income in and most expenses out, and that’s your budget. The rest goes into savings, and you’ll probably come way out ahead.

  9. Thanks for this post. I deal with worrying about paying off debt/saving every day. I find that it works better when I list things on paper. I guess I am a black and white visual person. I think tracking every penny is a good thing but very hard to do! I’m doing it this month and so far it holds me accountable from spending when I don’t really need to! :)

  10. I did get rid of everything excess, except cable and internet…no home phone, no newspaper or magazines, no purchases beyond food and gas weekly. For older citizens on fairly fixed incomes, it’s tough going. The only way I can make it is not to spend anything beyond basic needs.

  11. Hey paidtwice.

    I love your blog because you provide fantastic practical ideas. My hubby and I tried out our first written out budget at the beginning of August on an excel spreadsheet we made up ourselves. It worked well for the first month but our programming wasn’t that stellar and the spreadsheet didn’t work well for more than one month. We wanted to budget we just didn’t have a good way to record everything. Thank you for posting about Pearbudget!!!!!! It was sooooo easy to set up. It is such a relief to see exactly how much money we are spending. Thanks you again for that great practical piece of info. It really helped us streamline our finances.

  12. This was a great post! Great steps towards getting rid of the debt! I wanted to offer your readers a link to another blogger who is doing great work. He writes about our ‘childhood money messages’ and how the best approach to stability in today’s market is to resist letting these emotions control our buying/selling habits. It is really fascinating work, and something you should all check out. His name is Spencer Sherman, and you can view his blog at


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