I am not a financial planner. I am not an accountant. I have no professional financial training at all.
I am simply going to tell you what we did to become debt free, and another plan that many people I know have used to achieve the same outcome.
Like many couples, money was an issue at times, and the less we had the bigger an issue it was. After Gary's accident we had to completely re-evaluate how we thought about money. We tried strict budgets and using cash only. Both helped to a certain extent, but it wasn't until I found a copy of Your Money or Your Life by Joe Domingaz and Vicki Robin, at our local library and began going through the process set down in the book that I began to come to terms with money and why we felt deprived by the loss.
After going through this process and talking with friends and family who have been worried about money I have come to realize that getting rid of debt is a process similar to losing weight. In the same way that your weight loss solution will depend upon why you are over weight in the first place, or your relationship to food; your solution to getting out of debt will depend upon your relationship with money. In theory, losing weight is easy. Eat fewer calories than you burn; getting rid of debt is just as simple, spend less than you bring in every month.
Yeah, right. Anyone who has ever tried to lose weight or get out of debt will just look at you like you have two heads if you tell them that little tidbit of information.
In order to get out of debt, and stay out of debt, you need to know what caused the problem in the first place. Knowing what I know now, I can tell you without a shred of a doubt that even if Gary had not been hurt, if we had just carried on the way we were planning, at some point we would have faced the same trouble. We were on a road to financial disaster even before everything blew up in our face.
The problem with strict budgets and weekly cash allowances is that for most people, they leave you feeling deprived. As with such diets, you will save money and pay down some debt but unless you get to the heart of the matter you will find yourself right back where you started at some point. Your Money or Your Life helped us to understand our relationship with money and how we had been using money in our lives.
Once we were going through the process as outlined, we began to understand that we were using money to make us feel like we were are part of our community. Money, and the things we purchased with it, in our world was equated with power and pecking order. Social standing as it were.
Y.M.O.Y.L helped yes to really clarify what was important to us and what wasn't. We were then able to understand how best to use the resources we did have to shift everything around so we did not feel deprived.
I can say to you that getting rid of debt, and understanding how we were using money is the only reason we are here on this property, homesteading and happy. If we had not changed our relationship to money we would have ended up in debt again, and probably divorce court to boot.
The program outlined in the book is not difficult, it involves nine exercises and some of them are time consuming but I promise you it will change how you live your life.
The other program I referred to has become popular in the past few years. it is called the debt snowball and the term seems to be associated with a fellow named Dave Ramsey. This outlines a debt repayment program based on paying off the smallest debt first and then rolling that payment into the next smallest .. etc.
When we were paying our debt off we switched it around a little and paid off the highest interest debt first. Fortunately we had only one credit card so this approach worked quite well for us.
I recommend you check both out both resources.. Beware of people trying to sell you things to help get you out of debt, just walk away. If you are in serious trouble and thinking of seeing a CREDIT COUNCILLOR to negotiate a payment plan, make sure you research first. There are hidden fees, and it does almost as much damage to your credit as a bankruptcy.
Hopefully I have given you something to think about, and some tools to start the ball rolling. I have seen so many people start homesteads, get into trouble quickly, and then end up losing everything....all because of debt.
I know it can be overwhelming, you will want to give up, but stick with it. Just keep yo eye on what you life will be like and how much freedom you will have. I promise you it is worth it!
Have a great day everyone!