Calculating Your Personal Profits and Losses
Page 2
Take a fresh look at your overall expenses by separating the things you can reduce (utility bills) or stop (subscriptions, lattes, and so on) from the things you're stuck with (installment loans such as a mortgage, revolving loans such as credit card debt, and the like). Create a table like the above and fill in all of your expenditures. If you find that you have several loans in the "Stuck with It" category, creating a more detailed view of those items will help you to anticipate when you'll be done paying on them; this is critical information if you plan to create a budget later in this chapter.
To give yourself a better vantage point on your loan debt, create a chart or table similar to the one below. If you've never done this before, make sure you're sitting down: Seeing your debt totaled this way can be a real shocker.
Liabilities
| Liability (in payoff priority order, pay highest int rates 1st) | Amt Owed... | Credit Limit | Int. Rate | Min. Pymt | ...As Of | Notes |
| Citibank MC | 8,751.21 | 8,460.00 | 27.990 | 210.00 | 1/20/04 | Took $2000 cash advance to pay Ron for food; higher int rate on |
| Amex | 5,424.84 | 5,000.00 | 23.990 | 300.00 | 1/8/04 | Was originally 14.99%--??? |
| MBNA Visa | 1,973.75 | 2,500.00 | 12.990 | 50.00 | 1/23/04 | |
| MBNA WorldPoints Visa | 10,240.14 | 10,000.00 | 9.990 | 200.00 | 1/12/04 | Started 3/25/03 @ $8228.03--transferred Citibank to here; 5/03 |
| Bank--overdraft protection | 356.02 | 1,000.00 | 70.00 | 3/31/04 | 7/30/3: Not getting bills, address still not changed, sent fax | |
| Total Credit Due | 26,745.96 | |||||
| Mortgage | 135,081.31 | 7.250 | 12/30/03 | 30-yr loan:; started 8/13/02 @ $136,800 | ||
| 2nd Mortgage | 34,019.70 | 11.375 | 12/30/03 | 15-yr loan; started 8/13/02 @ $34,200 and 11.655% int | ||
| Total Mortgage Debt | 169,101.01 | |||||
| TOTAL LIABILITIES | 195,846.97 |
When you see what you're facing, you can plan your attack. (This is a great time to consult a financial advisor.) Strategize the best way to knock down your debt (for example, in figure above, you might notice this person has chosen to pay off items with the highest interest rates first) and keep yourself on track by updating this chart every month.
What to Do When Debt is Too Deep
What do you do when your debt has become truly unmanageable? If, despite your best efforts, organizing your finances and creating a budget just aren't going to be enough, you might need to consider a more drastic measure, such as declaring bankruptcy. Information on how to file for bankruptcy is available at www.uscourts.gov/bankruptcycourts.html.
If you suspect (or know) that you would have enough money if you could just stop spending it, you might find relief with Debtors Anonymous (www.debtorsanonymous.org). This organization employs the 12-step approach popularized by Alcoholics Anonymous to help people learn to control their spending. The Web site features a quiz to determine whether you are a compulsive debtor and some resources for suggested reading.