In troubling financial times, such as 2009, people are suffering more than they have in decades. As 2009 wears on we are likely to see even more catastrophes taking place in the stock market on Wall Street and of course for every day consumers on Main Street.

What I want to talk about today is getting your bad debt cleaned up. If we want to come out of this recession in good shape we need to take a serious look at our financial portfolios and our every day and every month living expenses. We as Americans have been living high off the hog for many years now and we are going to have adjust to different financial times.

Now back to what I was saying. As a nation of Americans we have all been searching or that elusive American dream, and now it is time to search for the “elusive state” of financial security. No longer should we be spending money on things we can’t afford and on things we don’t need. On a personal level, what we have done (my immediate family) is scale back our spending to “needs only” and “wants” very little.

If you think you need to be changing your spending habits, it is time to sit down with a piece of paper and write down all of our expenses that you have on a monthly basis, and all of the payments we make on loans as well. You will be surprised at how quickly your financial house becomes in order when you start to take the correct steps immediately.

Write down all of the debts you have currently and how much you spend each month on your loan payments. This section of your worksheet will be just about your debts and your loans, and the next section of your worksheet will be about your monthly budget and your monthly cash flow or out of pocket expenses. We will save the discussion about your income per month at a later date as we are more concerned with cleaning up bad debt and reducing our loan payments every month.

Once you have written down all of your different debts and all of your monthly or bi-weekly loan payments you need to check off the debt you have that would be considered good debt. Your good debt is defined as debt that is appreciating such as your home, a vacation property, a conservative mutual fund, or any money you are investing in a appreciating market.

You should include your car payments as bad debt even though your vehicle is not appreciating over time. Why?  Because your vehicle is essential for getting yourself to work, to school, and getting all of your necessary daily chores and tasks accomplished.

I would say that your vehicle expenses – in this case car or truck loan payment or lease payment – should be categorized as an appreciating investment in your monthly payments and debts column. This just for argument sake.

End of Assessing Bad Debt + Monthly Budgets Part [1];

Read on: Assessing Bad Debt + Monthly Budgets Part [2]