Getting out of debt

Over the last year or so, Ginger and I have been in the track to get out of debt and become completely debt free! Our goal is to have it all gone within the next 12-16 months, except for the house. The process has not been without its challenges, but we’re making headways.

I’ve decided to write each of the steps we’re taking to get there, with the whys and hows of each step. Feel free to ask me questions if you have any! I’ve been really really REALLY  excited about this, it's become an obsession for me.

Step #1 – The audit

You can’t possibly get out of debt if you don’t know how much money a month you spend on stuff. So the first step you need to take is to audit your bank account and find out all the places where your bank is leaking money, and list them out in a spreadsheet.

It’s actually very important to list them out and write them down! Don’t trust your memory to remember all this stuff, it can get confusing, and we’ll need to refer to this information later, so make sure it’s clean and easy to read.

Here’s how to do it:

1 – Go to your bank’s website, and look for your monthly statements. Once you locate them, go through them back to the first day of two months ago. For example, if you start today, go back to the statement starting  may 1st, 09.

2 – Look carefully through every single transaction. Write down on your spreadsheet every transaction that is recurring, as in monthly gym fees, automated water bill payments, credit card payments, car payments, etc. Write down the date the transaction happened, what the payments is for, and the amount. Do not write out stuff like fast food, movie nights, etc, but do write down fuel and grocery shopping expenses. All we’re putting together right now is a list of all regular bills (utilities, internet) and irregular bills (groceries, fuel).

This list will give you a first overview of everything that goes out of your account regularly. It’s predictable, or almost so. This will be a list of all the bills that you need to survive (like groceries) or that you’ll be sent to collections if you don’t pay (like your credit card payment). At the end of the day, you’ll know when something is due, how much is due, and who to pay. We also went back two months to ensure we got everything, including any payments you might’ve skipped for a month, and to help us get an average dollar amount for that expense (since some months you’ll spend more on fuel than others, for example).

Review your list, make sure it’s accurate, and then save it. It is time consuming, and it might be headache-inducing, but it’ll pay off!

Until next time!