I’m sure you’re getting bored with my philosophical rhetoric about how to pay off debt. And while it might not seem like changing your mind can really change you finances, we’ve learned that debt repayment is only 10% about the actual money and 90% about changing the way you look at the world. Today we’ll start talking about some actual physical steps you can take to reducing your debt.
Day 8: Count the Cost
Most Americans don’t even know what they spend from month to month. Even if you’re big on charts and graphs and checkbook ledgers, it’s a good idea to really scrutinize exactly how much money is coming in and going out of your household on a monthly basis.
Please promise me that you won’t set a budget without really getting a good handle on what you spend and need to keep the lights, water, mortgage, etc. paid.
Because if you set an unrealistic budget, say $50 a week for groceries when really your household needs $125 per week to get the job done, you’re setting yourself up for ridiculous failure. (Those are random numbers. I’m not suggesting either figure is a good amount. Grocery budgets vary by household depending on members of the household, age and stage of children, and of course your income to debt ratio.)
We had tried for years and years and years to budget (even when we were in much more debt and ok with it). And this is precisely what happened to us. I felt squashed and even constrained by the budget because it didn’t fit our needs.
Believe it or not, it takes about 2 months to really get a good handle on what you spend. So, for the next 30-60 days collect every receipt you have. Stick them in a file folder, a big box, or on the top shelf. And at the end of the month (or 2 months), sit down with your spouse and go through the receipts. These are the numbers that will really let you begin to set your budget.
Of course, you want to live as “normally” as possible. Don’t try to be “too good” so that your numbers look good. Or don’t go hog wild so you can just tell yourself that there’s no way to get out of debt on your income. Find a happy medium or the experiment will fail.
Annnnnnddd I feel I must insert a “no judging” sort of guideline to this exercise. Accusatory words when you’re starting this journey will. get. you. nowhere.
We all overspend from time to time. Yes both the Queen and King of Free are guilty of doing so. There will always be areas that you can cut back. There will always be expenses you can trim. However, if you don’t even know what your expenses are, there’s no way to know how to even begin your debt slaying journey.
