Finances, Part Four
You might be in a situation where you have no savings and can’t get a good head start on your debt snowball, and you can’t imagine how you can find $1,000 to get an emergency fund. Well, you probably have $1,000 laying around and don’t know it!
Brace yourselves: SELL YOUR STUFF. Grab that big fancy Flat Screen, extra table and chair set, some electronics or extra computers, tons of old clothes and have a big yard sale. Sell everything you don’t absolutely have to have. Odds are you will be a lot closer to $1,000 after the yard sale than you were before.
Then, if you have to…find some extra work. The sooner you get your initial emergency fund established the sooner you can start paying off debt.
Now you have the fund established…what do you do? Well, remember the list of stuff you wrote down? All of your expenses for each month? You probably cut out magazines and cable television, but you still have expenses left over. That’s where you start trimming the fat.
You need to start clipping coupons and buying store brand foods and drinks. (Another great tip is to just make the switch to only drinking water.) No more netflix, eating out, vacations, gifts, or other unnecessary expenses. (I told you this wouldn’t be easy.)
Here are the things that you need to live: Shelter, Food, Water, Gas, Electricity, Clothes, and as few vehicles as you absolutely need to get to and from work. Strip out the rest of the stuff you are currently spending money on and transfer that money to paying off debt.
Here is what your monthly budget should look like:
- Tithe
- Rent/Mortgage
- Auto Fuel
- Utilities – (Gas, Electric, Phone)
- Groceries
- Debt Payment
That’s it. Period. There are no other expenses.
“But, wait a second Austin…I have a car payment.” Sell the car. “But, Austin; I’m underwater on the car.” Sell the car and get a loan for the difference, plus enough to buy a beater.
I know this doesn’t make sense…I thought we were supposed to be getting out of debt. Well, let’s look at it like this: Your car payment is probably $300-$800 per month. (Trust me, a loan for the difference is much cheaper.) If you owe $18,000 for a car that is worth $14,000, wouldn’t you rather only owe around $6,000 for the difference plus a couple of grand for a beater?
This is the most painful step in the process. This is the step where most people fail. Most people check out at this point because they are attached to their stuff, they derive their self-worth from their vehicles and use vacations and entertainment to avoid dealing with their spending problems.
If you take this step seriously as a couple or as a family your relationships will flourish. You will learn a lot about yourself and in the end you will break your attachment to your stuff. (You can’t take it with you anyway!)
