In my ten-step process for getting out of debt, the most overlooked step is always the first one. Many people want to jump over Step #1, thinking that they already realize they need to do something, so why wait? Why not just move on to setting some financial goals?
The answer is simple once you understand Step #1.
In plotting a course for getting out of debt and lifting your head above water, the first step is to find out where you stand financially right now. That means putting together a Personal Financial Statement, a snapshot of what you OWN, compared to what you OWE. Not too surprisingly, you might find that you liabilities are greater than your assets! The difference between the two, what we refer to as “Net Worth”, may well be a negative number.
Is that bad? That is really not the question. The real question is “What can we do to make it better?” What’s the first thing to do when you find that you’ve dug yourself in a hole? Stop digging!
You can get a personal statement form from your local bank or online at a variety of sites. Here is one I like:
Personal Financial Statement
Looking your current financial situation in the mirror may not be a pretty sight. But that is precisely the reason it’s so important. We need a place to start.
Once we know our starting point, we can begin to put together a plan for eating that elephant sized mountain of debt. We can do it, but we have to take it one bite at a time.