I’m Drowning in Debt! What Do I do Now? Part 1

Posted by M.S. on May 11, 2009

According to recent news reports, the average American family has credit card debt of over $8,000.  You will NEVER get wealthy carrying this kind of debt, because your money is going to paying off your past rather than building your future! Let’s create a plan to get rid of it NOW.

Did you know that when you have this type of debt, the magic of compound interest is working against you, rather than for you?  Face it, you are making the credit card companies rich–not yourself! That should the incentive to get moving on this!

Start to turn things around right now and gain some financial peace of mind.

First and most importantly, STOP using your credit cards now!  Don’t make things any worse than they already are! The next step is to determine what money is coming in and what is going out each month.  Where do you stand on both sides of that equation?

Let’s look at the income side of things.  How much do you have coming in each month?  Add up all salary and wages, child support and any other income you receive.

Then, determine what you have going out each month.  Be honest! In order to see exactly what you owe, add up all credit card bills and the all bills paid through your checkbook.  Once you you know exactly what is coming in and what is going out, you can develop a spending plan.   If you find you are spending more than you have coming in, you are not alone! It is reported that over 40% of American families spend more than they earn each month!

Once you know exactly where you stand, you can focus on the 2 basic sources for the cash you need to pay off debt: spend less of what you currently earn or make more money.  We’ll examine the ways to do both of those in Part 2.