Combine Finances – If you are a newly married couple and are wondering if you should combine finances, my advice is to do it. It took my wife and I a few years to do this, mainly because we were both independent and proud people who felt they could take care of their own bills and payments.
The mistake we made is not seeing our debt as our debt. Once we combined finances, we combined forces. It also gave us a sense of being in it together. This is critical to the Married with Debt strategy. As long as one partner is not on the plan, your efforts and dreams of financial independence will likely fall by the wayside.
You should quickly combine bank accounts and stop viewing your paycheck as yours, and your debts as yours, or your savings as yours. It’s time to get serious as a family.
Compile Everything – If you don’t already have a spreadsheet of your finances, it’s time to start. First, make a row for every recurring, monthly charge: mortgage, utilities, student loans, car payments, insurance payments, credit cards, childcare, magazines and Netflix, gym memberships, etc. This means everything. Then make a column that denotes when the bill is due. Build twelve more columns, one for each month, to track when every payment is made. Every month, after you pay the bill, type the amount paid in that month’s cell. Doing this will help ensure you don’t mistakenly miss any payments or accrue late charges. This is essential.
In addition to tracking your bill payments, you will need to start tracking your spending. This also means everything from a pack of gum to your monthly groceries. It is not necessary to go crazy here and track subcategories like food, entertainment, gas, and the like. Just record the total amount of each transaction and for what vendor, and the date. Put it in a spreadsheet that will total itself, and you will have a running record of your transactions.
IF YOU ARE INTERESTED IN A FREE MONTHLY BUDGET AND SPENDING EXCEL SPREADSHEET TEMPLATE, EMAIL ME AT INFO@MarriedWithDebt.com AND I WILL SEND YOU ONE I MADE AND USED TO GET OUT OF DEBT.
Concentrate Payments – Now that you have compiled all your family’s expenditures, it’s time to focus on debt elimination. This is the start of your war with debt.
Looking at my largest debt, which was my house at $126,000, I was like a small band of guerrillas trying to take on the Chinese Army. I had to start smaller, so I started with my smallest. It was a department score credit card. I paid it off in one month while paying the minimums on all my other revolving debt.
Then I focused on the next largest debt, still paying minimums on everything, and I knocked it out in two months. The money that used to go to paying towards the debt I paid off last month now is going to my next highest debt. With time you grow stronger, and it starts becoming easier to pay off individual creditors. Having that growing pool of cash coming and going as quick as it came is a bit depressing, and leads to resentment. You mean I have to give you a thousand dollars, one hundreds times in a row? F*ck that.
I continued up the ladder, paying off credit cars and then ultimately both of our vehicles. By that point my arsenal was $1500 a month. I was able to control our spending and live below our means, enough to free up an extra $1500 per month that is now going towards our student loans, which started at $40,000 and are now down to $16,000. They will be paid off in one year.
Yes, you would pay your debt off slightly faster by focusing on the highest interest rate debt first, but like Dave Ramsey says (I credit one period where I listened to him for 2 months straight for inspiring my approach), if you were a math expert, you wouldn’t’ be in debt.