Getting Started on the Debt Free Journey

Yesterday I sat down to pay my monthly bills. My filing cabinet houses all of my important documents and it has a drawer dedicated to organizing my bills. I have a folder for each month so I re-use the same folder every year. When I opened up the January folder, I was shocked at the amount of statements filed away from last year. To give you some context, I had 27 bills last year compared to 11 bills paid out this month. An even better indication as to the amazing progress that's happened in just a year is reflected in the dollar amounts:

• January 2010 bills expense ~ $9,500


• January 2011 bills expense ~ $4,000

Woo Hoo! Wow! Isn't that craziness? In just one year, our bills decreased dramatically! How did we do it? Well, it was a lot of things and I'll be sharing all the nitty, gritty details through this blog over time. When I take a step back to reflect on our progress, I can't keep from smiling! This is especially sweet since I know just how tough it has been to get to this point. It's taken a complete turnaround in mindset and behaviour towards our personal finances. Working on this blog has opened my eyes to all the changes associated with our transformation. It's actually been a very rewarding New Year's resolution so far as it forces me to realize all of the amazing accomplishments and successes that have transpired in our journey so far. And believe me, patting yourself on the back is really tough to do through all of this. There's been many days where I'd wake up and wonder why I'm putting myself through this impossible mission. But I guess I'm living proof that it's not impossible after all.

The first step of the journey towards debt freedom is to simply get started. There are a countless number of books and people who can give you advice as to what specific steps you should take. I should know, I have read A LOT of them. But the one underlying message that is in everyone's advice for getting started, is to do just that...GET STARTED! Do something about it! Don't procrastinate! Don't wait for the perfect time to start because it will never come! Don't spend forever mapping out your comprehensive plan, you can start right away! I'm telling you from experience because I studied and learned, trying to come up with the perfect plan that utilized all the best steps from all the pieces of advice. And it unfortunately took me about a year to actually get going. If I could do it all over again, I would do something/anything right away and make adjustments along the way. You can't underestimate the power of getting the ball rolling. So, what should you do? Well, like I said, there's so many things to choose from (it takes a lot of work to completely change your mindset and behaviour). It's like unlearning everything you've ever known about personal finances and replacing it with debt free skills. Anyway, here are a few things that I think can and should be done right away.

• Understand The Problem


• Stop The Bleeding


• Be A Debt Hater

Understand The Problem - I know, I sound like I'm reciting the AA rules. But this is very key. First, you need to admit that you have a debt problem. Then, you need to figure out how big of a problem it really is. I listed out every single bill that needed to be paid. On top of that, I started jotting down each and every thing I spent money on. Have you ever gone to an ATM and taken out $20, $40, $100 and not really known how it was spent? I used to do that a lot. So, I tracked it, every penny. The results were jaw dropping. I was spending a fortune on going out to lunch, and dining out in general. I always used to think that I was a pretty frugal guy. I mean, come on, it's not like I go to the mall on shopping sprees...I don't even like shopping. But it's amazing how all of those Starbuck's runs, fast food lunches, restaurant meals with the family add up. I finally came to the realization that my "shopping spree" was eating out. Everyone has something, maybe it's shoes or clothes or sporting events or vacations or just "other stuff". I'm sure there's even a lot of hobbies that end up being very pricey (scrapbooking, skiing, golfing, etc...). Whatever your thing is, it will hit you smack in the face once you start tracking where every penny goes. It's only after you understand what your specific problem is, that you can do something about it.

Stop The Bleeding - To truly start your journey towards debt freedom, you need to stop accumulating more debt. Everyone tells you about the "cutting up your credit card" idea. I think that's a given. Obviously, you shouldn't enter into any other kind of debt too. Remember, a mortgage and car loans are debts as well. But I would recommend going a step further and cutting up your debit cards too! This is very ironic for me because I remember in the early 2000's when debit cards started becoming the norm. I used to think that anyone who still paid with cash were just old-fashioned and didn't want to embrace new technology. I remember trying to convince my step-dad that debit cards were the way to go and now I don't want anything to do with them. You might ask why, I mean debit cards take money from your checking account so it's not debt. Although it's true that they are not directly debt, I will argue that they make it very convenient to obtain more debt. The most common way is that banks have started to push associating a line of credit to your debit card. That way, if for whatever reason you use your debit card and you don't have enough money in your account, they just charge the balance to your credit line. Boom, more debt. But that's the more obvious scenario is which debit cards promote debt. The more subtle reason and by far the most dangerous is their ability to facilitate over-budget spending. The best example of this is when you buy groceries. How many times have you bought a bunch of things and when they were all added up, it came up to more than you expected to pay (i.e. you went over your budget, whether it's a defined budget or some loose expectation as to what you were willing to spend). Well, with the handy/dandy debit card, you would just swipe it and suck it up. You would probably just think to yourself that you'll make sure to go under budget with some other purchase. Well, guess what, that scenario seems to happen over and over again. After awhile, you constantly go over budget. Thus, eventually you could potentially accumulate more debt or at the very least, become unable to pay down your debt balances. Bottom line, if you use cash for everything, this over-budget spending temptation doesn't exist. If you run out of cash in your pocket, you simply can't buy anything, period. It's an absolute and all temptations become impossible as you physically can't go through with the purchase transaction. Stick with cash and stop the bleeding!

Be A Debt Hater - OK, I know this post is getting pretty long but I'll make one last point and wrap it up for the night. This final "initial step" really kick starts the mental transformation portion of the debt free journey. In my opinion, the mindset shift associated with how you view debt is absolutely the most critical component to becoming debt free. I mean, you need to get pissed off at your debt. It should embarrass you to have any debt at all. It's this "sick to your stomach" hatred that is needed for you to attack your debt ASAP. You should treat it as a life or death kind of thing. Debt = Death! Debt = Slavery! Debt = Serial Killers! You need to truly view debt as horrible as those horrendous things because this is the type of mindset you'll need to continue down the path towards freedom. This is vital because if you don't feel this strongly about getting rid of your debt, it just won't go away! There's too many temptations and societal norms that will persuade you to stay in debt.

Well, I hope these "first steps" make sense. Like I said, the most important thing is to do "something" about your debt problem, ASAP. And by targeting these few things, I feel you'll be in a great position to get this journey started!