UNDERSTANDING DEBT
Like most Americans, you've probably accumulated a considerable amount of debt. You probably have a general idea about how much you owe, but you probably haven't added it all together lately. It's disheartening to see the total in black and white, especially if your credit report includes some negative marks. But you can take control of your financial situation. Doing so starts with honesty.
lf you were trying to lose weight, you'd step on the scale to see where you are today, so you'd know how many pounds you want to lose. No matter how ugly the truth may be, you have to look it square in the face. Now is the time to be honest with yourself about exactly how much you owe. Unless you truly understand how much debt you have, you can't come up with a plan to eliminate it-at least, not a plan that's going to work.
You're going to examine your personal debt and figure out how it works-how the interest is calculated, which debt you should try to pay off first, and which debt it might be smart to hold on to.
HOW MUCH DEBT DO YOU HAVE?
Don't guess. Collect the most recent statements from every kind of debt you have. If you know you've been charging a lot on your credit cards, call the 800 numbers on your statements for the most accurate and up-to-date amounts you owe.
Now get a piece of paper and get organized. Create a chart, and fill in the amounts you owe and the interest rates. Use a pencil, so you can erase old information and update the chart as you make payments.
Now, find a place to post your chart. Choose the refrigerator, the bathroom mirror, or some other place where you'll see it often. 1 know-you probably don't want to look at it several times a day, but it's time to stop hiding from the reality of your debt. Instead of making you feel depressed, this chart should give you a boost. Each time you make a payment, you're going to update the chart, and you'll see your total debt shrinking. The chart will become something to smile about.
Not convinced? You're not a child, so you don't need gold stars as an incentive to do well. But you can give yourself something to look forward to once your debt is paid off. Do you have a goal such as taking a vacation, buying a new car, or buying something else that's special? Cut out a photo of what you want and keep it next to your chart. It will serve to remind you of why it's important to keep paying that debt.