When you look at YOUR FINANCES, can you see YOUR REFLECTION? – Part 2
In my last blog posting, I discussed how bad my financial picture was in 2001. My wife and I have come a long way since then and today, our finances have turned around and improved substantially. Yes, we still have debt, but we have it manageable and we have both reserves and income to deal with it, if necessary. That wasn’t the case in the past and it was very ugly. What exactly were the “next steps” that we put into place to get out from our financial mess?
The first step toward financial healing is to take full responsibility for the mess you have created. I know I have already pointed this out, but it needs to be said as many times as it takes for you to hear it. I can tell you first hand that I was no better and I didn’t think things were that bad, not to mention I was in denial. Well then, why in the world would anyone listen to me? Because we are sooooooooo alike and I still run across this problem over and over again. This point is so crucial that I equate it to an alcoholic admitting that he/she is an alcoholic. I have been told that this is their first step and I too found out that this was my first step. I, yes I, admitted that my finances were a complete mess and I was responsible! There, I said it again and I do feel better. How about you? Are you ready to let go and start over again? Until you do, this will be a very long road indeed……………
The second step is to see where exactly things stand. This meant that we had to list out all outstanding debts! Yikes and the list was longer than I thought. Keeping it in your head may allow you to avoid it, but getting it on paper tells you the real story. What if I have forgotten any of them you ask? Not to worry as it won’t take long for you to receive another of those lovely bills/notices. Creditors won’t forget and you will soon remember. Why in the world would anyone do this? If you don’t know where you are how can you plan to correct it? It is somewhat therapeutic in that all of those voices in your head actually just quiet down as there is nothing else for you to guess at. Do it and tell me if you had the same reaction as I did – internal peace!
The third step is to take all of your total household sources of income, ongoing monthly expenses and total outstanding debts and create some form of a plan on paper or on a spreadsheet. The world calls this a “budget” and I even throw up at the use of this word. I prefer to “plan” out my next step(s) and you will need to do the same. Once you have it all laid out, you will need to see what needs to be cut out from what you are currently doing. Yes, cutting back is necessary. This can be very difficult if you are married and I know first hand as this required the cooperation of my wife. Yes, she didn’t like it one bit. Can you guess why? All of a sudden, I told her what was now acceptable to spend our money on and……………….…I’ll leave the rest to your imagination. I made sure my wife knew it was not for ever, but I told her that I did not know how long it would be. I also mentioned that her option would be to speak with the creditors if she did not like my plan. This got her attention.
The biggest reason we were in our dilemma was that we spent more that we a brought in. WOW, I know, this is rocket science – NOT! This is usually the real problem as we tend to live above our means and have been doing it for an extended period of time. This is why you need to cut back and it does require discipline. The rewards of taking this step are better than you can imagine. I dare you to do it!
The fourth step is to watch how you speak about your situation. We too had this problem and we had to make sure that we did not speak what we didn’t want. Saying such things as “we’re broke” or “we can’t afford it” or “we will never have that” only prolongs your bad financial situation. Yes, they may be true, but you don’t have to reinforce them on a continual basis. To combat this, I searched for alternative phrases. We started saying “I choose not have this today” or “this is better for me later on” or “I don’t really want that right now”. The difference is that you are actually deciding to postpone what you want by choosing phrases that say this. You also have to believe that they will be available to you in the future. If you don’t believe, you won’t have them. We did believe and what we believed for has happened many times over.
The fifth step is to calculate what net income your household is actually bringing in. If you really believe and can see that you need to add additional income, I would highly recommend that you seek outside counsel first from someone whom you trust and fully understands where you are at. Once you have done this, take at least 24 hours to review what your options are. If you have a spouse, have them come to your meeting and discuss your options together. If you still believe this to be the right course of action, implement it. Be careful as I have seen the negative effects of this strategy. While it may seem like a good idea, all you are really doing is looking to increase your income without dealing with the real problem – OVERSPENDING!! The best strategy, in my opinion, is to increase income while decreasing outflows/expenses. This is how we were able to get further ahead in a relatively short period of time. If all you do is increase income and don’t look at cutting back, chances are you will increase your outflows/expenses once your income increases and you are no better off. And this too I have seen many times…………..
On my next blog, I will discuss the “results” we achieved by following the steps laid out above.
What are your thoughts? Feel free to comment…………………………….
On your “NUMBERS” team,
2 years ago / 2 Comments
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