Outstanding household debt in Ireland is a staggering 32,283 million euro at end November 2006 (National Treasury Management Agency—www. http://www.ntma.ie/NationalDebt/natDebtIntro.htm). In the U.S, it was for many people, debt and money problems are a way of life. It’s horribly easy to slip into debt. Credit has never been so easily available, interest rates are low and we are bombarded by messages to consume and enjoy. It’s almost unheard of for people to actually save up for anything. It’s just too easy to go to the local lending agency and get a top-up loan. But family situations can change; people can get sick, children arrive on the scene with the difficult choices of childminder vs. stay at home parent. All of these can negatively impact on finances. All of a sudden, the credit card bills seem to be swelling, and it seems so much easier to make the minimum payment and ignore the rest. However, it all catches up with you in the end. Reality can hit when one of your cheques bounce or your credit card is refused. It’s then time to take a long cold look at your finances. Below are some steps you can take to begin tackling your financial problems.



--Money, we have a problem: The first step is to acknowledge that you have a problem and that it’s not going to go away.

--Get a money buddy. The second step is to get help. This could be from your spouse or a family friend or from MABS (www.mabs.ie). Make sure it is someone who is a good financial manager but who is also supportive.

--Show me the money (coming in) : Begin by listing out your income from all the various sources. This is normally relatively straightforward (unless you are self-employed, which can probably be done by simply reviewing your past couple of months’ bank statements.

--I owe, I owe: Next comes the tricky bit. List out the money you owe. Include car loans, mortgage and credit card bills. Identify the monthly payment on these. You should now be getting a picture of where you are fixed financially.

--Reality Cheque: The next step involves identifying your actual money expenditure. This can be an interesting experience. For the next month, write down every single item of expenditure that you make in a single location (could be a notebook or you could collect receipts whichever suits you). Once you have a monthly figure for each item of expenditure, you should now have a clear picture of where your money is really going.

--Shall I compare thee…Now compare income with your expenditure. Identify how much of a monthly gap you have.

--Get saving. The received wisdom is that you should apply your savings to clear your credit card debt but I actually think that it’s a good step psychologically to begin some sort of saving plan. Even if it’s only €5.00 a week…that’s over €250.00 that after a year that you wouldn’t have had otherwise.

--Elimination Round: At this stage you should be able to identify areas where you can cut back or eliminate (at least until you get your finances back on track).

--Finger off the trigger: Now the fun begins! Actually identifying and doing something about your spending habits. An important part of changing your spending habits is actually identifying what triggers your spending. For some people it’s a must have gadget, for others it’s an emotional thing. Take the time to write down and identify your spending triggers. The next step is to identify what you need to do to avoid that. For example, if you find that you spend a lot on clothes, make a conscious decision not to purchase any clothes for a month. If you find that you are spending 100.00 a week on entertainment, go out once a month instead. Make a conscious decision to identify your spending triggers. If you find that you are not good with your credit card, give it to your money buddy.

--Get creative about it: Instead of seeing this as a dreary exercise to squeeze the life out of you, why not approach it as an interesting challenge to get the same level of enjoyment but at a much cheaper financial price. Shop in cheaper stores, look out for bargains, develop other hobbies and interests that do not drain you financially. Keep in mind that this is all being done to get you in good financial shape.

--Assess progress. After you have completed the first month of your new financial habits, take the time to assess progress. It is very important to give yourself acknowledgement for your efforts. Sit down and review how your spending has changed. At this stage you may find that the panic and fear has subsided to some degree.

--Debt-busting: I believe credit cards are both one of the best financial tools around and also the one with the greatest capacity to cause damage. The only really intelligent way to handle a credit card is to pay it in full every month. Then they are brilliant. If you feel that you can’t do that right now, consider moving your credit card balance to one of the many providers offering free balance transfers and 6 months 0% credit. Then, come up with an amount that you can realistically pay every month to clear the balance. Set it up as a direct debit so that it happens automatically. If you know you can’t handle the plastic, give it to your money buddy on the clear understanding that it’s only to be given back in emergencies (and that means an emergency, not a bargain in Brown Thomas).

--Set financial goals. Once you begin to see a way out of your financial situation, consider sitting down and creating some financial goals for yourself. If you have a why, you can find the how. It can become much easier to be self-disciplined about spending if you know that it’s going towards a bigger goal.

--You can do it. Remember that when you finally courageously take those steps towards financial health, that you can do it. Know yourself and your spending habits and make the changes.

If you are interested, you can get a free report called 37 plus ways to more intelligent spending by sending an e-mail to report@masteryourmoney.net.

Tips

1. Next time you purchase something, ask yourself if you really need it.

2. Assess the real annual costs of those “small" weekly and monthly costs. Is it worth that much to you?

3. Explore creative ways to get those small luxuries…swap with others. I love magazines so I will bring a bag of them to the doctor’s surgery and swap for a similar number of different ones!

4. If you are a divil for the plastic, give it to a friend for safe-keeping and only go shopping with cash.