Six Steps You Can Take Now To Get Out Of Debt

In today's economy the buzzword is austerity. Gone are the days of living beyond our means using easy credit to do so. In order to simplify and decrease the stress in our lives, we need to reduce and eventually get out of debt.

If you have started a debt reduction plan - good for you. But, if you are having a difficult time getting started or developing a plan, this post will provide some much-needed guidance. And if you have had a drastic change in circumstance, such as the loss of a job or unexpected medical condition, you definitely need to follow this roadmap!

Here are the six steps:

1. Sit down, breathe, and take inventory of where you are and where you want to be. Since you probably know where you are, you need to define where you want to be in life. Money will only be a part of this picture. Write down a very detailed description of your "perfect" life, your deepest dreams and aspirations, financially and otherwise. Include as many details as possible.

2. Understand your cash flow as it is now. Make a list of all your income and all your expenses. Is the difference negative, or positive? Also, gain an understanding of your assets and liabilities, and the difference between the two (your net worth). Is that positive or negative?

3. Review your current cash flow CLOSELY. Look at areas that you can decrease expenses. Be non-judgmental, act as if you are an advisor consulting with a client. Find your "inner accountant" to assist with this process. Remember, your goal is to gain control of your finances and get out of debt!

4. Look at your true hourly wage. Figure out all the income you make from your job (including employer-paid benefits) and deduct all related expenses (commuting, daycare, etc.). Then, figure out the number of hours you devote to your job for the same period of time, including commuting, overtime, afterhours meetings, etc. Then divide your net earnings by your total hours, to get your true hourly wage. What does this tell you? Are you surprised? Using the information learned in Step 1, about your deepest dreams and aspirations, reassess your work situation. Would something else make more sense? For instance, maybe you will earn less hourly by working at home, but after considering commuting and other related expenses you will actually earn more, doing something you love? Turn a passion into income!

5. Look at your total expenses, reduced to the lowest possible monthly amount and including what you need to get out of debt as quickly as possible, to determine how much you need to make each month. If you are already making that much and more, then great - you know what you need to do. However, if you don't have a job, or are making less than you need to each month, time to get creative. Again, review your deepest dreams and desires to brainstorm ways to increase your income. Get creative and turn passions into cash. Everyone is an expert at something!

6. Develop a roadmap to get from where you are to where you want to be. Identify the steps needed to get you to your perfect life, and set deadlines to have each step completed.

Having a clear picture of where you want to be and the income it will take to get there will help you make appropriate decisions for your situation. You will feel empowered and energized because you have the information needed to better your situation and get out of debt, once and for all!

These are only six steps from the many exercises contained in the Life Money Handbook, which you can download free from this site! If you truly want to be debt free, you have to take the first step.

 

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