Its crazy how life forces you into some huge life decisions at such a young age. While I had done the math I knew I’d be walking out of my undergraduate degree with a pile of debt. I got married shortly after graduation and added more debt to the pile.
Getting out of debt is no easy task and I was about to learn first hand.
Before I had my own income and managed my personal finances, I have to admit, debt was a bit of a foreign concept to me. Yes I had a very good idea of what my monthly payment would be but it kind of ended there.
Was that a lot relative to what my income would be? I truly had no idea. I didn’t know what groceries cost, car payments or anything else for that matter.
The first step to getting out of debt
A lot of people don’t know where to start when it comes to getting out debt. You feel so overwhelmed. You don’t know where to turn.
This is not a fun stage. It seems there are dozens of things that need to get done but it’s so difficult to decide the first step. That first action.
A lot of people don’t know what to do in this situation. What did I do? I battened down the hatches.
I controlled my spending and did my best to keep it as low as I could. This isn’t a long term solution but it gave me time.
My wife and I lived like college students. We got the necessities in our apartment but we certainly didn’t go out buying every last thing we needed.
I continued to buy drive my 15 year old car, packed my lunches to work and really used those first several months of marriage and the real world to stay under the radar.
With all of that being said, I believe the first step to getting out of debt is to hunker down and lower spending as much as you can.
The second step to getting out of debt
The second step of getting out of debt is to put together a plan.
After I had worked to temporarily cement our lifestyle I wanted to understand three things:
- My income
- My expenses
- My debt load
It’s weird coming out of college and managing money for the first time. They said my salary was so much per year but how much of that do I actually get to keep home?
I’ve never lived on my own outside of college where a lot of things (food, classes, etc) are kind of prepaid. I didn’t have a good feel for what our monthly expenses would be as we moved out of the “batten down the hatches” stage.
Fortunately I had a 6 month grace period to figure out my student loans. In that period I worked to understand who I owed, what I owed them in total and what my monthly payment would be.
For this second stage of life my entire goal was to just not screw anything up. Pay all my bills. Hopefully put some cash in the bank and call it a day.
I wasn’t worried about anything else. Once I had a good feel for my numbers (income, expenses, and debt load) I could move forward.
Work your numbers. Put together a plan. If you have a spouse (even one that doesn’t want to manage they money) make sure to get them involved.
The third step of getting out of debt
The first step of getting out debt may take a couple months.
The second step of getting out debt takes as long as you want it too. If you have a good feel for your numbers the whole plan could be put together in a night.
Realistically it will take several weeks or a couple months to put together a plan you and your spouse feel comfortable with.
Because both of those are relatively short time frames they really aren’t too bad. A lot of people run into problems with the third step.
Not because it’s hard and not even because its complex (I mean you put together the plan after all).
A lot of people run into problems with the third step because it takes patience and trust. The third step in getting out of debt could take several years or more so you’ve got to stay patient.
Because it takes so long you’ve got to trust the process. A lot of people out there will make a lot of other paths look so much better.
Others around you will be buying new cars, purchasing larger houses and upgrading their lifestyle. Watching all of this and not following suit is the hardest part.
Rinse and Repeat
What a lot of people don’t understand is that achieving success in your finances is as simple as:
- Earn a growing income
- Spend a budgeted amount of money
- Save, pay off debt or invest the gap between the first two.
Rinse and repeat. You’ve just got to trust the process.
It sounds so simple, which makes it so easy to just kick the can down the road. With most things in life the actual understanding of the topic is the hurdle.
A lot of people run into the trap of “I understand how to do it so I’ll just do it later”. It just doesn’t work. Life kicks in. Add in some kids, a few vacations and a new car payment and you realize you just turned your 5 year plan into a 12 year plan.
It can happen so fast!
You’ve got to act now
Don’t wait to start this process. Every day you aren’t attacking your debt its growing.
It doesn’t matter how old you are, what’s going on in the world, or where you are in the process. Even if it seems like the process will take 100 years its better to take the smallest of steps now.