So, since the last post, there was lots of time to accept the challenge and calculate your financial health by figuring out your net worth. Lots of articles these days claim Americans are in a sorry state financially so maybe(and very likely) the numbers you saw didn’t leave you feeling warm and fuzzy. Nope they most likely made you feel upset and maybe even angry. The uncomfortable truth for many is plain and easy to see. Maybe the idea of ignorance is bliss jumps to your head, but before you go dig your head in the sand realize the awesome power of knowledge.
I know a little ditty that goes ” If you can’t see , you don’t know, and if you don’t know you can’t control”
The great news is now we see it, now we know and now we can control it.
No longer will you be just a lowly passenger on your financial journey. No it’s time to grab your traveling wallet and sit in the drivers seat. The time for action is now.
II. The Escape Plan
Now it’s my understanding that any negative net worth is due in large part to a lack of savings, but even more likely to a big PILE OF DEBT! Now who here is in any sort of debt? ( I am) And who thinks their debt constitutes an emergency? Sorry to tell you but Debt is an emergency! You need to acknowledge it!
So now what? Well I can tell you what I did. If this sounds good follow along and implement the plan.
1. STOP ADDING DEBT
Your goal is to get out of this mountain of debt. Don’t add more , Don’t take any detours. No more buying on credit if you can’t pay off the balance in full before you get charged interest.
2. Track your spending, get in the know
I did this for 3 months when I was starting out. Figure out how much you are spending in all the categories: rent, food, restaurants, utilities. After seeing how much I was spending I could move to step 3.
3. Make a Savvy spending chart
In other words budget. Now is the time to tackle your spending. Identify the areas you can cut down on and do it! Like I said debt is an emergency which means, you can’t afford to go to those $15 a pop movies,( If I need the big movie screen experience I wait till they come out in 2nd tier theaters only $2 a pop) just wait for the Redbox. You need to brush up on the haggling skills and get better deals on insurance and phone plans. Possibilities to cut down are endless.
4. Build your safety cushion
Shoot for $1000 . The point of this money is that if you have an emergency you will be able to cover it without going into debt. (it’s not for a vacation or new big screen t.v.)
5.Pay down that Debt.
Once you have that small safety cushion its time to put the pedal to the metal. Figure out the debt with the highest interest rate. For me it was my student loans, start to roll the money in! I designate big money to student debt. Go heavy, debt isn’t going to destroy itself. I have been actively contributing 15-25% of my paycheck since 2011. More then 3 times higher then the minimum payments, more then some people contribute to retirement. Like I said debt is no joke, and I can see the light at the end of the dark tunnel.
Now you can bask in the awesome feeling of power.
Calculate your new arrival date. No longer is the future shrouded in the smog of uncertainty. You have a plan and if you stick to it you know when you’ll arrive.
Maybe its just me but I get a happy feeling knowing that I have control of my life. I’ll be honest even married with finances always being a group discussion I have been the one to put the challenges on the table. Cutting down on eating out at restaurants didn’t faze me, but my spouse wasn’t happy about it. So yes even with the awesome power of control you might experience some discomfort. But I’ll ask you this… Isn’t the destination, that light at the end of the tunnel, ridding yourself of debt worth some discomfort.
Or in a true travel analogy. That discomfort is like being on a plane. Most don’t like the hassle of waiting, boarding, fighting for over head cargo space and being cramped in your seat. But we deal with the discomfort because the destination is worth it. In the end we’ll be somewhere new and exciting, and we will get to stretch out and breath some fresh air. Don’t remain trapped because of the chance of discomfort.
The destination is worth it. Start the journey.