AutomaticPersonalFinance.com

I am one of the lucky ones, to be 100% honest with you I have never been in debt other than an auto loan and mortgage, never had a credit card that I couldn’t afford to pay off at the end of the money. This doesn’t mean I cannot relate to exactly how someone in debt may feel. Working for a rather large bank I used to see daily the destruction lack of financial responsibility can cause someone.

Many people who have dug themselves into a financial hole do not know where to start to reverse course.

The first think you have to do is figure out exactly how bad it really is. Most people who are in great debt do not even know how much they owe, or how much they need to pay each month to just cover the minimum.

The reasoning is if I do not pay attention to how bad it really is I will not have to face the music and do what needs to be done.

So if you have no guessed it yet you need to figure out how bad it is. Sit down right now and figure out exactly how much you own, the interest rates attached to all debts.

Next you need to figure out exactly what all your monthly expenses are(rent or mortgage, utilities, telephone, cell phone etc..), do not skip a single thing.

Figure out what you can cut out that is a recurring monthly expense. Do you really use the high speed internet that much, do you need a telephone and a cell phone? Most people have financial issues because they signup for these monthly obligations that are more than their income.

Next you have to figure out exactly how much you make every month. This includes any interest income, even money you find laying on the ground or returning soda cans.

You have to spend less than you make, 99% of the time people having trouble spend much much more than they bring in each month. So the solution is simple spend less! Ok, I know it really isn’t that simple. But you need to cut out things, even things you may enjoy, like TV until you can get your bills under control and consistently make more than your monthly obligations.

The other option if you cannot cut out anything is make more money. This is possible in many ways, starting a home based business, picking up a second job or working more at your primary job.

In the next blog post I will focus on how to cut back.

Derrick