Sometimes it’s hard to put your finger on it exactly…that moment your debt became overwhelming. People can have this reality check at very different stages in their financial situation.
Sometimes you just realize one day that you have been ignoring your money and that you have no idea how much money you actually make, what you owe to who, or how you spend your money from day to day. You might decide that you want to have a clearer picture.
Sometimes it’s when you bounce a check or when you can’t pay a bill on time. Then you realize you might not be making the best decisions and want to take action to correct your situation.
Sometimes, it’s when you receive a call from a collection agency about an account that’s overdue. Or when you notice that you are dodging the phone altogether to avoid collection agency calls. Or maybe even when you are in a cyclical pattern of pay day loans that is digging your further and furthre into a financial pit.
No matter what the point is, there is always a choice that can be made to change the situation. Even though it might be one of the most challenging things you’ve ever had to consider, it will be one of the best things you’ve ever done in the long run (and the short-run).
First Step: You can’t fix it if you don’t think it’s broke!
Be honest with yourself. Sit down with a glass of wine (not ten glasses!) or a cup of coffee and a calculator and run the numbers. Gather together all your bill statements, loan paperwork, insurance documents, mortgage/rental information and anything else that needs to be factored in and build an understanding of where you’re at financially. It could be done in an Excel spreadsheet – or with a pen and paper – and tally your monthly costs of living taking into account living costs (mortgage/rent, auto payments, insurance); consumer debt (credit cards/store credit cards) and monthly bills (utilities, phone, etc.).
– Know what it costs you to live every month/ or every two weeks
– Know what your total debt is
– Know what you have incoming every month (wages, investment income etc)
This actual step might be the most difficult step of them all. Going through everything and trying to locate all the paperwork and totals might take time. Not many of us can put our hands easily on all this information without at least some digging around through random desk drawers and disorganized filing cabinets.
Let’s break “Step 1” into smaller bite-size steps pieces; we don’t feed babies steak for a reason so we should probably try and be reasonable with our expectations of ourselves:
Step 1.1 – Find the paperwork you can find in your home
Step 1.2 – Log onto your online accounts and get your most current statements
Step 1.3 – Contact the company, organization, agency, or individual that holds information and request said information. (for example, call Revenue Canada for your “Letter of Assessment” if required)
Step 1.4 – This might take some time to put together and that’s okay. Just remember to keep everything in a safe place while you’re waiting on the rest of the information.
Stay tuned for the next installment of “Step 1 – Okay, you have a clue it’s broke, but you’re not sure how broke” We’re going to build our budget….