Debt-Free Forever by Gail Vaz-Oxlade (the beginning after the end read novel .TXT) 📕

income if the money goes into the bank since you’ll see the deposit. However, if you’re paying for stuff you buy with the cash you receive without it ever going through your account, your numbers may look weird. Why? Well if you buy all your groceries with the cash you receive, then your expenses may have only a paltry amount for Groceries. Most people do a pretty crappy job of monitoring their cash receipts and expenditures, choosing to do mental math to keep track of it. Mental math doesn’t work, and you’ll have to come up with a better plan, but not until it’s time to make a budget. For now, don’t sweat it.

Once you’ve totalled up all your deposits for the past six months, divide your total by six. That’s how much you bring in, on average, each month. Keep in mind that for the purposes of your analysis, we’re working with averages. When it comes time to do a budget, we will have to be more specific.

STEP 5: WHAT’S THE GAP?

Now that you know how much you’re bringing in and how much you’re spending a month on average, you have to figure out if you’re under or over. Subtract your total monthly expenses from your total monthly income.

If you have a positive number, you’ve been spending less than you make. If you have a negative number, you’ve been spending more than you make.

At this point, you may be in shock. Routinely people say, “How can I be spending so much more than I make?” The answer is “credit.” People use credit to fill the holes in their cash flow. And they do it so routinely, whipping out the credit card even at the supermarket, that they don’t have a clue about how much money they’re blowing through every month. They just know that no matter how hard they try to pay off their debt, it never seems to go down.

Want to see how you got so far into debt? Take the amount you’ve been overspending every month and multiply it by 12. That’s how much you’ve been overspending each year. Wow!

If you’re in shock, that’s a good thing. Like the couples I work with, you may need a big shock to get you to a place where you know, beyond a shadow of a doubt, that things have to change.

Spending Analysis Worksheet

2

FACE UP TO YOUR DEBT

It’s time for some more math and some more hard truths. Most of the people I work with don’t have a clue how much they are spending on their debt. When I ask people to fill out a list of what they owe, including their interest rates, they guesstimate. And often when they sit down to add it all up, they just about choke on the total. Sure, they knew they had that student loan, and that car payment, and that buy-now-pay-later furniture, and those three credit cards, but they never added it all up. And now that they have, they feel sick.

You, too, may have compartmentalized your debt so that the number doesn’t seem quite so large. And you may be so afraid of the hole you have dug that you choose to remain ignorant even when you say you want to make things better. Well, you can’t make things better until you deal with the reality you’ve created, so make sure you check all the interest rates and loan balances when you’re making your list. Guesstimating doesn’t count.

John Wayne said, “Life is hard. Life is harder for stupid people.” Hmm. So it’s time to get those statements out and see just how much damage you’ve done.

STEP 1: MAKE A LIST OF YOUR DEBT

The first step is to list everything you owe. Grab all your outstanding bills, a piece of paper, and a pencil. I’ll wait …

Start by listing all your debts (everything but your mortgage), from most expensive to least expensive. Your most expensive debt is not the biggest one, although over time it may prove your most costly if you diddle around with paying it back; your most expensive debt is the debt with the highest interest rate.

While your list of consumer debt does not include your mortgage, if you have refinanced your mortgage to repay a line of credit, a bunch of credit cards, or any loans, that portion of your mortgage must be included on this list. Why? Well, it’s become pretty popular to use home equity to pay off consumer debt. People end up hiding past spending indiscretions under their roofs and then fooling themselves into thinking it’s “housing” when it is in fact “rabid consumption.” Have you been playing that game with yourself, pretending you’re not in debt and hiding your rampant consumerism in your mortgage? It’s time to get past playing games, right? You need to ‘fess up to ALL the debt.

Your list of consumer debt should include the individual interest rate for each debt and the total amount owed on each piece of credit. If you can’t find the interest rate, pick up the phone and call your lender. You need all this information so that you can finally make a plan to deal with your debt.

This list can help you to prioritize where you’ll make your payments. You might have a list that initially looks like this:

Now that you know to whom you owe what, and the interest rates you’re paying, the next step is to figure out the minimum amount you must pay to stay on the right side of your credit history.

STEP 2: FIGURE OUT YOUR MINIMUM PAYMENTS

When it comes to listing your minimum payments, the amounts will depend on the kind of credit you have.

Credit cards: Credit cards show the minimum payment required on the monthly statement, so plug that into your chart beside the amount owed.

Instalment loans: The minimum on an instalment loan—like a car loan, student loan, or consolidation loan—will