No, it's not give up. Find a quiet spot, sit down and think about all of life's blessings that you are grateful for. Once you have realized that it's not as bad as you have made it out to be, it's time to get to work.
We have all been there, whether you want to admit it or not? If you are a person who has never had a worry about the balance of your bank account or how you were going to make the monthly bills, you have no business reading this blog. But, if you were like the majority of Americans out there who have at one time experienced fear, anxiety, or a significant amount of stress about how you were going to make ends meet, you were in the right place. Even, if you think that you might run into a problem in the future, this is the place for you.
First, you need to take stock of your net monthly income and your monthly expenses. Right now, drop whatever you’re doing, and make a list of how much income you have coming into your household and what you believe your monthly expenses are. Write it all down as quickly as you can.
The income side is easier, or at least should be easier. Everyone should know how much money they have coming into their household each week, biweekly or monthly. If you are married or living with a significant other, get them to join you at the table, tell them what you are doing and add their income in as well. Again, we are looking for total monthly income at this time.
Next, put in your fixed monthly expenses. Start with mortgage or rent as it is usually your biggest expense. Then, add car payment(s) and what you believe you spend on food, electric, cable, cell phone etc. Once you have all of the fixed living expenses listed, move to the discretionary expenses like eating out, morning coffee at Starbucks, entertainment, etc.
The last set of expenses are the luxury items which you could probably live without. For example, last Friday night when you went out to dinner and drinks with your friends. How much did you spend at the restaurant? What about gifts for your friend's baby shower? How about the new pair of gym shoes.
I’m not here to get into the psychology of why people buy things. Let’s just say that we all have selfish reasons for what we do. But, I am here to tell you that you can probably live pretty well on the money that you make if you change your mindset when it comes to money.
The purpose of this exercise is not to tell you that you have been foolish with your money, it's the exact opposite. I want to show you exactly where all of your money goes every month. I want you to squeeze each and every dollar to get the most mileage out of it. I want you to walk away from this exercise empowered, knowing that you are in control of your finances. I want you to know where each dollar goes and know that each dollar is being put to it's best possible use.
So now that you have your lists, it’s time to start tracking where each and every dollar that you earn goes. The goal here is to make each dollar you earn go to its best possibly use. For example, you should be budgeting money for rent or mortgage each and every month. A certain percentage or dollar amount out of your paycheck should be immediately set aside, no questions asked. The same goes for your car. If you don’t have a mortgage or car payment, good for you. Next, you should be setting aside money for all of your fixed monthly obligations. You don’t want your car insurance to lapse or your electric bill not to be paid.
After you have those bills in check, you really need to look very hard at your discretionary spending and ask yourself: Wow, this expense really necessary? You may or may not like the answer to this question, but you need to ask the question anyway. The only way we’re going to make progress is if you stretch your thinking and make a decision not to waste money anymore on selfish items. Things that will make you feel good in the moment, but steal your long term joy.
If, after setting aside money for all your necessary fixed living expenses and variable monthly living expenses, there is no money left to pay bills, you should seek the services of a professional bankruptcy attorney immediately. If, on the other hand, you do have discretionary income, but you just don’t have enough to meet all of your minimum monthly payments on your credit cards, store card and gas cards or medical bills, you should still seek the services of an experienced consumer bankruptcy attorney to talk about your options. Bankruptcy should always be your last option, but, depending upon where you live, how old you are, your living situation, etc., you should definitely explore whether bankruptcy is an option and whether or not it’s the best option for you. If it’s not, great, you can now take it off the list and move onto your next best option.