The first step in Setting a Course to Be Debt Free is to decide that you want to be debt free. The second step is to make a list of your debts, because if you don’t know what you are trying to eliminate, you won’t be successful in your debt elimination plan. Here’s how you do it:
Get a piece of paper, or use a spreadsheet, and make a list that shows:
- the name of the creditor (ex. ABC Bank Visa, line of credit, etc.)
- the amount owing
- the interest rate
Once you have made your list, check it again to be sure you didn’t miss any debts. Here’s a list of common debts; do you have any of these?
- credit cards
- lines of credit
- mortgages (first, second, and third mortgages)
- car or truck loans
- RRSP loans
- recreational vehicle loans
- loans from family
- loans from your employer
- payday loans
It’s easy to forget the $500 your father loaned you last year, but chances are your father hasn’t forgotten, so make sure the debt is on the list. RRSP loans and house mortgages are also easy to forget, because they are “good” loans, used for investment purposes. That may be true, but they are also debts that must be repaid, so put them on your list.
Now pull out a copy of your bank statements for the last two or three months and review them to confirm that there are no other debt payments you forget to include. A complete and accurate list is necessary for the next step, which we will discuss in our next post tomorrow.