You have to keep your big picture goals in mind. Popular personal finance experts will give advice that includes things similar to: sell your house and your car and move into a studio apartment walking distance to work with 6 roommates or quit your rewarding non-profit job that you love and go get a better paying job. While this advice will definitely get you out of debt quickly, a lot of people just aren’t going to follow it. The extreme advice will make people shut down and just keep doing what they’re doing. I’d rather have more realistic recommendations that are actionable and help you achieve the big picture goals. It’s also important to mention that suggestions may work perfectly for some people and be just completely unrealistic for others and that’s ok. That’s what makes it PERSONAL finance. You have to evaluate any advice based on your situation and determine if it’s a fit for you.
When I first started really struggling with my student loan debt, I remember how frustrated I would get reading blogs about how to cut your expenses to payoff debt. I think that will work very well for individuals in debt because of overspending, but for my situation, it didn’t help at all. I already had a roommate, was tutoring in addition to my full time job, didn’t have a car payment, didn’t have cable, and rarely ate out. Spending is half of the equation and, at a certain point, there just isn’t anything else that can be cut and you have to think about the other half of the equation — income. No matter how good of a saver or a budgeter you are, if you do not have enough money coming in, it will feel impossible to tackle your debt.
Where do I begin?
Step 1: Take inventory of your income and expenses. Subscribe to get the free budget download to use as a template.
Step 2: Determine which side of the income/expense equation you should start with. You can always adjust both sides, but it’s important to choose one to focus on first.
Step 3: Once you decide where to start, read the article focused on that topic for ideas about how to get started. Read more about income here. Read more about expenses here.
Which side of the income / expense equation did you decide to focus on and why? Comment to share your story.