Catapult from your lowest point
You’re at a place where you recognize something needs to change in your life and in the way you handle your finances, but you don’t know where to start. You want to clean up the mess you’re in and unload this heavy burden. But how do you navigate this road? How do you even begin to chip away at this massive mountain of debt and make a dent? Is it possible to depart from old, bad habits and form new, good ones?
You hear the negative chatter in your head that question your conviction to change. If you do not silence the voice of cynicism, it will uproot the hope that’s sprouting up to give new life into your personal affairs. Watch out that fear can cripple, but realize that the better life you ache for is on the other side of it.
I remember the numbing feeling of drowning at a pile of overdue bills and seeing my dwindling account statement balance. It just doesn’t add up. Each time the phone rings, I know it’s not a welcome conversation. I deflect collection calls because I desperately wanted to be left alone. I’ve asked myself repeatedly how it got out of hand. I ball up in shame and isolation.
I wondered if this stuff even happens to other people? Because I surely didn’t expect it to happen to me. If it did, their lips are sealed. And for a reason: it was demoralizing to be in a position of extreme financial stress. I felt like a failure. Is there a way out?
Then, I heard about the story of David and Taylor. They were supplementing their income with credit cards too, and living paycheck to paycheck, forced to stay in low-income housing. A fire lit up in them, and they strike a pivotal point where they devise and follow a plan of attack that will tackle this surmountable task of taking back their lives. And at age 30 & 25 respectively, these two became debt-free, with no credit cards, and are now living without anxiety on a combined income of $30,000
We can catapult from our lowest point and forge ahead into our redemption story. But holy anger must rouse up from the very depths of your soul. You need to fight back to win your life back.
So what do we do now to inch forward in the right direction and get from point A to point B?
Admit that something must change
The behaviors that got you in trouble in the first place cannot be the same approach you default to in getting yourself out of trouble. You’re only digging a deeper pit if you do not turn about and change your ways. Albert Einstein was broadly credited with exclaiming “The definition of insanity is doing the same thing over and over again, but expecting different results.”
Eradicate the victim mindset
Do not get distracted from self-pity and keep questioning whether your problems are “fair.” How would it help you if you keep convincing yourself that you’ve suffered more than anyone else? There is something you can do about your situation no matter how hopeless and depressing it feels right now. Flip that switch mentally, emotionally, spiritually, and turn the lights on.
Strip it down to the basics
Numbers do not lie; people lie with numbers. So this exercise is meant for you to be truthful about naming your actual needs. Get a sheet of paper and accurately tabulate all your sources of income on the right side. Draw a line down the middle and then put the numbers for your basic necessities on the left side. Strip it down to the “Four Walls” of your household like food, shelter (including utilities), and transportation.
Covering only the fundamentals, you should come away with a conclusion of whether you need to be focusing on the left side or right side of the equation. Do you increase your income or do you decrease your spending?
Muster up the courage to measure the numbers
With the aid of online banking, download all of your transactions from the past month. Assign a main category for each line item. You may also include sub-category to be more specific.
For example: Main-category | Sub-category | Amount
- Utilities | Electricity | $100
- Utilities | Water | $60
- Utilities | Trash & Recycling | $35
- Totals: Utilities = $195
Prepare a pivot table report for your personal consumption. Look at your spending patterns objectively. Remove the guilt and don’t be in denial. Look at it from the lens of a student doing math homework. You are solving a problem with basic addition and subtraction. But the answers you get is revealing, and a real life-changer if you act upon your insights. Raise your grade from F to A.
Create your first true budget
Equipped with the data and hopefully, fresh realizations, gear up to prepare your first true budget. You can put your financial house in order, and this budget serves as the blueprint.You can put your financial house in order and your budget serves as the blueprint. Click To Tweet
Remember the left and right side of the equation? An effective budget follows this formula: Inflow minus outgo equals zero. This means you do not spend more than you earn.
Take what goes in your account, then put a name for each line item that gets taken out of your account, like all of your monthly obligations and living expenses until you’re down to zero. Zero – and not a negative number that puts you on a deficit. It may be difficult to get this down in the first try, so rinse and repeat.
I encourage you to be strong and take heart. Everything will get better with focused, consistent effort. We didn’t land in this mess overnight, so coming out of this mess will also take a lengthy process, and might call for all we got. But you will develop the stamina to run this race. Do not give up. One step after another, just keep going… and you will hit the finish line.