Get Your Stuff Together – The Money Game – Medium
Step 2: Get Your Stuff Together
So you have those scary figures in front of you. Now it’s crunch time. You need to break it down into affordable monthly payments while at the same time, STOP USING CREDIT. Debt elimination is what 100% of your extra income is going to go to.
If you are in SERIOUS financial trouble, as in “I’m about to declare bankruptcy,” trouble, you need to do two things fast, BEFORE you begin bankruptcy procedures. First, look up and make an appointment with a financial adviser. Your bank may have people on staff who can help you.
If you can make an arrangement with your bank to pay off your debtors by giving you a fixed-term, equal payment, low-interest loan, you can simplify your debt elimination from the beginning. As long as you make that one payment on time each month, you could be debt-free and rebuilding your credit in as little as three years.
I know, three years is a long time; but if you don’t start now, it could be thousands of dollars worse and you’ll have slid even further backwards financially.
If your bank or a financial adviser is not available to you, it’s still possible to eliminate that debt on your own.
Call the billing departments of all your creditors: major credit cards, department store cards, utility companies, the landlord or your mortgage-holder if those payments are behind. Let them know that you are beginning to clean up your finances and you want to know if they are able to help you with a repayment plan.
This does two things for you. It lets your creditor know that you are taking responsibility for the balance you owe, immediately putting your account closer to being in good-standing. It also eases your burden, if the company is willing to work with you by either lowering your bill if it’s a recurring, billable service, forgiving a certain amount of the balance owing (yes, some companies WILL do this for you), and/or lowering the interest rate or waiving a monthly fee provided you continue to make a timely payment each month until you’re caught up.
Once you have struck all the deals you can strike, it’s time to get the calculator out again. If you’ve had help from a financial adviser, he or she may have already done this with you. If not, here’s how:
Find out exactly how much money you have coming in on a monthly basis. Add up your NET take-home pay from any jobs you have. If you have a partner or spouse who is on board with you, you can amalgamate those figures. Don’t forget to add alimony payments, child-support, government rebates or any other regular income you are receiving.
Next find out what this coming month’s MINIMUM payment due is for each of your creditors. Include rent or mortgage payments, insurance premiums, car payments, internet, cable, phone and cell phone bills.
Add all these payments up and hopefully, your income is higher than your out-going payments. If it isn’t, you have to bite the bullet and cancel some of this stuff out of your life. There is ALWAYS a cheaper option — just sometimes, that means giving it up completely for a little while. I’ll tell you about some inexpensive and free trade-offs to replace expensive entertainment options in a future article.
What you’re aiming for with all these calculations, is an almost even board with hopefully a little extra income coming in than payments going out.
Here’s where you make a choice: pick ONE of those creditors. This creditor gets more than the minimum payment every month. I chose the creditor with the smallest balance, with the reasoning that the entire bill would get paid down faster and I would feel like I was seeing results sooner.
It worked, too!
So next month, you are going to pay just the agreed-upon minimum balances to all of your creditors except for one. That one gets all the extra money you have after paying your expenses.
I know this is hard. Doing things this way can leave you feeling hard-up and “poor”… BUT… if you can stick it out for even just 90 days — three months of payments — that might be enough to give your determination a boost. Call it a challenge; call it a game; call it whatever it takes to get you on a better financial path.
You can’t get ahead if you’re still behind.
The next article in this series will cover ways to make those payments on your debt larger — the bigger the payment, the faster you’re free!