The First Baby Steps

Anytime that someone undertakes any overwhelming task, that person has to set small obtainable goals - baby steps - in order to accomplish the task.

Getting out of personal debt can seem like you are swimming in the middle of the ocean. All you can see is water all around you and not even the slightest sliver of land in the distance! The easiest thing to do is to just give up and file bankruptcy - right? I mean, that is what everyone is doing these days!

As we have worked with clients over the last year or so, MOST of them are not in a position where they MUST file bankruptcy!

But, how can we possibly give them hope?? By taking "Baby Steps".

Baby Step #1 - Establish an Emergency Fund of $1,000
You may ask, WHY in the world would I put money in the bank when I feel like I can't pay all of my bills! Fair question! By putting $1,000 into the bank, it immediately provides you with a "cushion" to allow you to quit using credit if an the alternator goes out on the car. You simply take the cash out of the account and pay for the repair! This cushion will allow you to undertake your hardest challenge in Baby Step #2!

Baby Step #2 - The Debt Snowball
List ALL of your obligations and debts - everything! All collections, credit cards, student loans, house payments and car payments. List them beginning with the smallest to largest balances. Begin systematically getting rid of them and paying them off beginning with the smallest balance first. Why start with the smallest and not the one with the highest interest rates? Because you need some relief and some little victories in this process. Payoff and close those little annoying credit cards that you opened up to get the 15% discount at Christmas. Get rid of them and celebrate the victory! As you get a few little ones paid off, add those monthly payments to the next largest one until it is gone.

Be patient and don't get frustrated! It took you a long time to get to this place in your life and it won't get fixed overnight!

Don't fall for the Debt Consolidation Loan Scam. No one ever got out of debt by borrowing more money!! This may make some sense immediately because you have the opportunity to lower your monthly obligations BUT, if you don't change your spending habits, you will end up right back where you are today!

As a bank loan officer, I can't tell you how many people came into the office to take out a home equity loan to pay off their credit cards ONLY to return in another year wanting to do it again! They never changed their spending habits and once the cards were paid off, they started using them again!

If you have followed this blog for any length of time, you are probably SICK of hearing me say it BUT, "You've got to have a plan in place if you want to get where you are going!" You have got to have a budget in place, on paper and live by it monthly in order to WIN against personal debt!

Step up and START taking your Baby Steps Today!