You need a financial selfie. Not a posed, glamour shot, but a realistic picture showing where you are now. With that information you will have the basis for making good decisions about how to clear your debts.
An honest self-portrait
The first thing is to get a Financial Summary which looks at your income, expenditure and debts. You don’t have to get all the numbers for the Financial Summary worked out at the start – it’s fine to use some guesses and you can then go back and make it more exact later on if you need to.
The totals that come out from this will then help in exploring your likely debt solutions. You can work methodically through a set of flowcharts, or take the quicker approach of the debt solutions roadmap.
The aim is for you to:
- get a good basis for looking in detail at specific debt options, and not waste time on those that can’t possibly work for you; and
- get a better feel for where you may be able to Improve your Finances.
Of course if you can improve your finances, for example you decide to reduce your spending on something, that changes your financial summary and – if the change was large or you were on the border between two possible debt choices – may make a difference to what you decide to do. So this “financial selfie” process isn’t just a means of recording your current status, it’s also a tool for exploring what you could change.
When big things change in your life – get divorced, get promoted, children leave home – it’s worth having a good look at your new situation to see if you have any different options.