2torial #0692:
Learn2 Get Out of Debt (continued)

Assess your spending habits

Most people with large debts have them because they tend to spend more than they make. Unless you're in debt because of an unfortunate situation (such as an accident or divorce), you probably need to rethink the way you spend money.

The best way to assess your spending habits is to make another worksheet. At the top, write down your total monthly income after taxes, including your monthly salary and any other source of income (like a second job). Subtract any fixed payments such as credit cards, loans, utilities (phone, water, gas, garbage, etc.), and mortgage or rent. Now it's time to see how much you spend on other things.

For one week, carry a notebook with you and write down everything you buy. At the week's end, look at your notes and make another worksheet, this one categorizing what you spent money on. Include groceries, clothes, movies, eating out, transportation, and anything else you spend.

Now, decide what you can live without. For instance, if you spend $50 (U.S.) per week on cabs, consider taking the bus. If you spend $7 a day on lunch during the week, it's time to bring sandwiches to work. Cutting out small, easy things can eventually add up to a lot of extra money, which you can use to pay off your debts.

However, keep your goals realistic. Allocate an affordable amount each month for an occasional "splurge" so you don't feel deprived. If you buy something fun or treat yourself to a meal with money you've set aside, you'll enjoy yourself twice as much.