So if you are a regular reader of my content you know I have been working in the finance field for literally decades. This blog isn’t about finance generally; however, I do give advice and strategies in finance from time to time for people with anxiety.
Anxiety sucks and finances can really lend to your anxiety spiraling out of control. In the very best scenario you have a written budget you stick too, you have an emergency fund (I went over this here) and you are debt free. If you are like most people you might have one of the above, its likely you struggle with all of the above.
You don’t have to be great at finance to be successful financially. You do have to be disciplined and this is where so many people crumble. This post isn’t here to judge you, this post is going to be a simple tool you can use to start to tackle your debt. Below are 5 simple steps that if you stay with and focus on, in time you will be debt free.
- List your debts smallest to largest. Everything gets listed. Every situation where you owe someone or something money you list it in order by total dollar amount. EXAMPLE:
- Joe = $500
- Mastercard = $2300
- Car = $11,000
- Student loan = $38,000
- Next to each debt on your list, record the minimum payment you can make. Estimate it if you don’t know but the point is we need a monthly total of the minimum amount you can pay per month on each debt.
- Determine the maximum amount of money you can spend on your debt. Look everywhere for income and come up with a number you can live with. Not the minimum payments, a flat number. So, if its $500 a month you can spend on paying down debt, fine. This is not the sum of your total minimum payments, don’t confuse item 2 and 3.
- Subtract the total minimum payments in item 2, from the total you can spend in item 3. This is your working cash. So, if your minimums = $400 and the max you have to spend is $500.00 you have $100 working cash.
- Take the working cash (in our example $100) and add it to your payment on the smallest debt.
What this is called in the finance world is the debt snowball. So, you are applying your working cash on the smallest debt first to get it out of your life faster. You continue to work the formula, but now you have your lowest debt paid. That minimum payment should add to your working cash and you now apply that to your next smallest debt.
The effect is over time as smaller debts get paid, your working cash gets larger so your payments against larger debts is more impactful and thus they get paid off faster.
I know this is just not some peoples cup of tea. Finance, numbers etc. just sucks. So does anxiety, and the anxiety of being in debt can be crippling. Work this program, you’ll feel better, you’ll improve your credit, you’ll get people off your back for money, and you will have less anxiety.