Continued from [1]
Once you have eliminated (by not checking off one of your debts) some of your listed debts you need to discuss with your spouse and family members how you can best remove that data from your personal financing portfolio. I fully understand that some of these bad debts cannot, and will not, be quickly disposed of because you have chosen to be locked in to some sort of an agreement – a loan agreement or contract that you cannot get out of right away.
Do not stress this fact too much because you can make a plan for the future which entails getting rid of those particular bad debts. Once you have calculated your monthly payments on your good debts, or necessary debts, you can add up the total amount of loan payments you make in the month with your new plan. Once you have your total good debt payments calculated write that down in bold somewhere on your personal financing worksheet.
Now you must look at your monthly budget and this is not as easy as most people make it sound. In order to accurately figure out your monthly budget you need to spend a month tracking and writing down all of your monthly expenses in detail. You need to include all of your monthly expenses and this includes going to the movies, renting movies, buying products out of a “desire” and not a “need” – including all of the gifts and items you buy or holiday seasons.
Unfortunately I am talking about paying for extracurricular activities such as golfing, boating, or any other kind of recreational activity the costs you month to month money. It is sad to say that the hard truth is you are going to have to give up some of these luxuries and wants. You are going to have to focus on your needs and temporarily let go of all your extra spending habits.
Once you have made a list of all your monthly bills, expenses, utilities, telephone bills, then it is time to add them all up into one monthly number ($$$).
Now I want you to check off all of the monthly expenses you need and leave unchecked all your monthly expenses that are based on desires and wants. Now add up your monthly expenses based on the checked off items only, and then recalculate all of your needed monthly expenses into one total.
Now it is time to add up your total monthly expenses and your total monthly debt payments into one total. When you have calculated this number you need to sit back and take a close look at that number. Ask yourself if what you are earning in household income pays for all of this, plus 10% extra.
Every family (or individual) will have completely different calculations and results using their personal financing worksheet. You may find that when you have seriously sat down and examined these calculations you are not making enough money per month to pay for all of your needs. If you are one of these unfortunate people you need to take even further action – such as finding better and higher paying work, or drastically cutting back on your monthly expenses and debts.
This may mean selling your home, selling your car, selling your motor home, selling your boat, and perhaps selling everything and starting over. I know that this sounds crazy and “over-the-top” but remember you were poor (well some of you were) at one time and you were happy then. Do not think for a moment that you will not be happy if you have to cut back your lifestyle dramatically.
End of Assessing Bad Debt + Monthly Budgets Part [2];
Read on: Assessing Bad Debt + Monthly Budgets Part [3]
Other Posts of Interest
A LOAN CALCULATOR FOR CRUNCHING YOUR NUMBERS IS BELOW; Enter your loan amount, how many years, the interest rate, and payment frequency (14 for biweekly, 30 for monthly, 7 for weekly. Very helpful so you know exactly what the loan will cost you in interest payments and you will know the total COB (cost of borrowing).
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