As we continue our series on Setting a Course to Be Debt Free, let’s review the first steps.
First, start by deciding that you want to be debt free. You must make a conscious decision to achieve your debt free goal.
Second, make a list of your debts, and check it twice to be sure you haven’t missed any debts.
Third, arrange your list of debts in order of the interest rate you are paying, from highest to lowest. Your goal is to start by paying off your highest interest rate debts first.
Now that you know what you owe, and which debts you want to pay off first, the next step is to determine what you can afford to pay on your debts each month. For that, you need to make a household budget.
Yes, I know, “budget” is a scary word. You aren’t great with numbers, and you are not an accountant, and you don’t want to spend your evenings with a calculator trying to figure out where you spend each dollar. It seems like a daunting task, but it isn’t. Keep it simple.
Get a pencil and a piece of paper, and write down where you spend your money each month. Rent, food, bus fare, gas for the car, the coffee shop, whatever. You know all of your big numbers; carry that pencil and paper with you, and write down all of the little things as well (like buying a coffee, or paying for parking). That list will help you determine where your money goes, and how to cut expenses to save money.
Need some help? Here are some great resources:
- Check out our personal budgeting tips on our blog, including:
- Our most popular post on how to make a personal budget;
- Read our most popular page on household budgeting;
- Sign up for a free one month trial of Calendar Budget, the easy to use on-line budgeting program.
You can do it, but your journey to debt freedom starts now, with a personal budget.