Q: I’m 27 years old and just can’t seem to get control of my money. Christmas spending was out of control and money has gotten so bad that I’m thinking about filing bankruptcy. How do I do that?
A: Though I’m no politician, I’m going to address your question Washington, D.C., style. I’m not going to reply to your question. Instead, I’m going to give you my answer. If elected Dollar Dictator, I will guarantee no more bankruptcies. Every man, woman and child across the country will spend less than they earn, save more than their neighbor and enjoy living within their means. (Does that sound electable?)
Financial destitution happens for many reasons. Some are tragic, but most are not.
First, trace back where the money went and why. Did you pre-spend a bonus that never arrived? Was your lifestyle created on overtime pay that suddenly became a 40-hour work week? Was job loss a culprit, or did you feel that if you didn’t spend money at the holidays people would think you a Scrooge?
While understanding the past will not erase debt, it does help you identify and avoid repeating your mistakes.
Secondly, construct a budget based on life’s necessities: food, shelter and basic transportation. (Cell phones and satellite TV don’t make the cut. Really.) Subtract these expenses from your total monthly take-home pay to arrive at the amount left to battle your debt.
Now attack your debt. Pay the minimum on all debt and extra on the highest interest-rate debt. When you’ve conquered that debt, attack the next highest rate.
And lastly, spend one hour a week at the library reading about how to better manage your finances. It’s not rocket science. It’s just basic math – spend less than you earn and the rest takes care of itself.
Now, what was your question?
D. DRUMMOND OSBORN, CFP, is a lifelong LaPortean and director of wealth management at Osborn Wealth Management, a Registered Investment Advisor, where he focuses on investment management, financial planning and trust advisory services. Visit him on the web at www.osbornwealthmanagement.com or e-mail him your questions or comments at drummond@osbornwealthmanagement.com.
