First Step In Managing Debt Is Taking Responsibility
Byron R. Moore, CFP®
Personal Finance
The News-Star
August 14, 2004

Question: How can my husband I and get out of debt? We have had several large medical bills that put us over the edge. Both of us work and we have no energy at the end of the day to talk about money. We both feel very trapped. We hate to consider bankruptcy, but what else can we do?

Answer: You can start by taking responsibility.

You are placing blame for your debt on external factors: medical bills, work, exhaustion, trapped feelings and even the siren call of bankruptcy.

I’m not denying that any or even all of these circumstances are real. At this point, they are simply irrelevant. Your focusing on these external circumstances is a total waste of time and energy. 

You have debt. It is yours. You own it and it owns you. 

There is only one person that can get and keep you out of debt and that is you.

1. Take responsibility. Stop wasting your time playing the blame game. You are the only person that can get (and keep) yourself out of debt. 

2. Take small steps. You need to make real, measurable progress so that you can have some victories under your belt. It’s the best way to stay encouraged to keep going.

As a first step, focus on setting up a small emergency fund of $2,000. If you are working hard on paying off your debts, and the car breaks down, it is mighty discouraging to go further into debt just to repair the car. So step number one is to get $2,000 in the bank before you go after the rest of your debts. 

3. Take aim. Budgeting is not complicated or hard to understand. It is all about you making your spending choices ahead of time, instead of someone else making them for you. 

Budget worksheets are easier to find than cheap jewelry on the Shopping Channel. Look online by typing "budget worksheet" or "budget form" into Google. Or call my office and we’ll send you one for free. 

Armed with a budget worksheet, take your total after-tax income and back into how much you will spend on each item per month. Unlike the nurse who once told me how that ten-foot long needle wasn’t going to hurt ("you'll just feel a little pressure"), I’ll be straight up with you: this is going to hurt.

Just not as much as being deeply in debt. 

So take a deep breath and dive in. Your goal is to find at least 5% of your total after-tax income to start paying down your smallest debt. You get extra credit for finding more. Once the first (smallest) debt is gone, add its payment to your debt reduction efforts and watch the results multiply. 

By taking aim at one debt at a time, you maintain focus, enjoy a series of successes and multiply your efforts over time. You literally get better with every debt payment. 

4. Take time. It may take you two to five years to get out of debt. I know that sounds like a long time. But what else are you going to be doing in five years? And how will you feel if you are completely out of all non-mortgage debt in five years? Pretty darn good, I’d say. So get started and keep going.

5. Take charge. You do not control all of your circumstances (or even most of them). But you do control your reaction to them. No matter what happens, don’t give up. You’ll have good days and bad. Just keep going.

Every day that you take charge of your debt reduction efforts is a day you take one step closer to your financial freedom. And free is what you want to be.

I’ll see you at the finish line!