Living Within Your Means, Part 4

Last time we looked at cutting back expenses, staying away from new debt, limiting FUN money to a set amount each month, and beginning the process of paying down debt.

So how do you go about paying down your debt? What debt should be the first to go?

Begin with a list. Yes, here we go again with another list. That’s right. You need to have a complete list of all of your debt. Do it this way.

Your list should have the following across the top:

  • Name of the lender or loan
  • Interest rate
  • Minimum monthly payment
  • Current balance due from your last statement

If you don’t get a regular statement because you pay online, get the balance due and interest rate from the current account information in your online account page.

Next, list all of your debt going down the page. Start with your mortgage if you have a home loan. Next add a second mortgage if you have one, home improvement loans, all lines of credit, all car loans with each car listed separately, boat loans, and RV loans. Then add department store cards, VISA, Master Cards, American Express, and Discover outstanding balances. Finally, add other loans such as student loans, medical debt, family loans, and any other loans.

If you do this list on a spreadsheet in your computer, it will automatically add the monthly payment column and the total balance due column.

Now you have a complete list of what you owe monthly and the total balance due. For some of you, this will be the first time that you actually see all of your outstanding debt on one list. That may be frightening. But look at it!! You actually owe that much. And it will get worse if you don’t take steps to get out of debt.

Here are two simple reasons why you want to get out of debt:

First, it’s expensive. Let’s say you’re out looking at a new Curved 65” HD TVs. And you work a really good deal and “get them down to $2000” and after all, what’s the big deal, on your credit card it will only be about $51 per month.



What’s the big deal? That new TV will cost you over $1000 in interest. It will really cost over $3000. So is it still a “really good deal”? Paying for something over time with interest can be very costly. That TV will cost you 50% more because you used their money instead of saving and using your money.

Secondly, you need to get out of debt because, no matter how you cut it, it causes stress in your relationship. When all you think about or fight about is money, it hurts your relationship.

More next time on the best way to get the debt paid off….