During this U.S. government shutdown of historic length, household debt Holiday spending hangovers are an even larger threat than in recent years.  Furloughed government workers still have expenses that need to be paid, whether by cash or credit and there will be extra debt to be paid when the shutdown is over, even if it feels like a windfall when the back pay comes in. 

If you are not a government worker, this is still traditionally the worst time of year in the struggle with debt reduction.  The holidays are past, and the bills are due, making a whopper of a post-holiday hangover.  No wonder many of us stay home, snug and warm until spring; it costs less!  That’s the bad news about our debt.  The good news is that there are still steps you can take to bring your debt under control or eliminate your debt altogether.

Set Debt Reduction Goals 

The best way to achieve any debt reduction goals, is to set them.  Setting specific goals makes you ten (10) times more likely to achieve them.  Writing those debt reduction goals down makes you thirty (30) times more likely to achieve them. (More at Financesonline.com.)  That means the first step to becoming free of debt is to make your budget, and then write it down.  Next, write down your plan on how to reduce debt until you are either debt free, or have achieved the lower level of debt that you are comfortable with. 

Put Your Monthly Expenses in Writing

Enter all monthly expenses on an excel or into a budget app.  You can also use a word doc or just a sheet of paper to list your monthly payments.  I feel it is important that you do your own debt  prioritizing instead of filling in pre-arranged fields in an app.  Putting the monthly debt budget on a document that allows you to move around the expenses as you prioritize the list helps you realize your priorities and work within them.  Got your budget written or typed out?  Great!  Take a deep breath.  You are on your way to debt Elimination. 

Review Your Expenses in order of Priority

Do your priorities make sense for care of your household?  For example, if you have small  children, the order of priorities may be shelter, food and clothing; or food, shelter and clothing.  Shelter means the mortgage or rent, homeowner insurance, electric and heat.  Next, consider transportation to work – whether this is a car or subway allowance – you need to include it in your monthly expense budget.  If you own your own car, is there a monthly payment on it still?  If yes, budget it.  Repairs on an older model car need to be in your budget too.  If you use internet or cell phone to earn your living, that is a high priority too.  Now go back through your list and rearrange your monthly budget by priority.  Add all of the monthly payments up. 

Determine your Debt Approach

Total your Monthly Debt Payments and Your Take Home IncomeIf your monthly expenses are at, or higher than your take-home income, don’t panic.  Do stop buying anything except the household necessities.  There are 3 alternatives to fix this problem: 

  1. increase income
    1. get a second job
    1. sell off unneeded things on eBay or classifieds
    1. another member of household gets a job – even if part time
  2. decrease expenses
    1. remove redundancies.  If everyone has a cell phone, you may save money by canceling the land line. 
    1. Cut or lower non-essentials.  Maybe you can find a lower price cable option or internet provider.  Buy only the needed clothing, not the high fashion option.
    1. Share or trade.  Do you have a friend who can use that gift cert you got for Christmas?  Maybe you can trade for one you can use on needed items.  Same with kid’s clothing.  Trading basics can keep down costs if you don’t have someone in your own household who can use the hand-me-downs.
  3. a combination of 1 and 2.

Adjust the budgeted expenses that you can lower- but check it out first.  Don’t assume you can do without some utility, like internet, only to have more expense to get it back.  Cut any debt you can, then let’s look at targeting the credit debt to get it back under control.  If you still need to after cutting expenses, decide the best way to increase your income. 

Break your Big Goal into Several Smaller Ones

Figure out how many months it will take to bring expenses back under control, and set little non-expense rewards along the way to celebrate your progress.  Google free things to do in your area  and set up little adventures that don’t cost more money as your rewards.  You can set goals by percentage of reduction or by total dollars owed or by getting certain credit accounts paid off.  People are motivated differently, so go with what will keep you engaged.

Make a chart that helps illustrate your progress.  Seeing improvement in your debt burden will help you achieve freedom from all that debt.

Stick with it.   Once you know how you want to reduce your debt, find the app that works for you or just stick with the document you created.  Once you achieve debt reduction, you will be amazed at how quickly it happened…it only seems to take a long time when you are starting down the path to debt elimination.