So, you’re sitting down with your spouse to tackle the finances. The first step is to get an accurate picture of where you are at in terms of income and expenses. On your worksheet (computer based or on paper), layout two basic areas, one can be called simply “Income” and the other “Expenses”. Now as you start to plot this information out, it may be easiest at first to simply work with one column per month. Keep it simple for now, just take your basic net income numbers from your paycheck and that of your spouse. Don’t worry about the gross amount, just put down the total take home pay for the month. If you have any other sources of reliable income, list those as well. Now add that column up and list the total monthly income.
Now do the same thing for the expenses. I recommend you list the utilities and such together, as usually there’s not much you can do about those types of expenses, then bunch the car payments and etc. together, and lastly put the credit card payments down. Add this number up and total it, and this number is your total monthly expenses. Now at this point, you’re going to have one of two situations. The first is a situation where you monthly income number is larger than the monthly expenses number, the second is the opposite of that, where the monthly expenses number is larger than the income. So, depending on what the numbers say now, you have two basic courses of action:
- Monthly expenses exceed monthly income – Ok, time to talk tough here. You’ve created a bit of a problem for yourself, and it’s time to take a hard look at your lifestyle. You’ve hit the point where you are living beyond your means. Now this may not be something you brought on yourself, perhaps a medical situation has generated a bunch of bills beyond what you can pay, but whatever the cause, the truth of the matter is you need to find a way to tip the scales back in your favor. Basically speaking, you’ve got to find a way to reduce the expenses, and while this may not be fun, you may have to sell your fancy new car and drive something cheaper for a while, or cut back on the dinners out, or pack a lunch instead of buying lunch every day. Trust me, while it may not be fun, there are ways to cut back on your expenses, and you need to find ways right away!
- Monthly expenses are less than monthly income – This situation is a bit better, because you’ve got a little bit of room to work here. So the first step you need to do is to make sure you’ve got yourself a little cushion built up, some cash in the bank to cover emergencies or to keep you from turning to the credit cards for some unexpected expense that might pop up like a necessary car repair or something. Next, you need to start taking the extra income each month and vigorously pounding away on the credit card totals. I suggest you start with the largest, highest interest cards first. Pay as much extra as you can on one card, and keep hammering away at it until that one is paid off. Then take the TOTAL amount you were paying to the first one, and add that to what you have been paying the second one. The second one is now getting the minimum payment you have been making, plus the entire amount you were paying the first before it was paid off. Do this and you’ll be surprised at how quickly the second balance will start to disappear. Keep this up, never reducing the actual out of pocket payment total each month, and before long, you’ll be making some very significant progress on your overall debt problem.
Now understand that what I’m presenting here is such an overly simplified approach that it may seem almost comical, but conceptually, you are going to have to take the basic action I listed above to begin to get your financial situation under control. The books and web sites I’ve highlighted in this section can do wonders to educate you, to provide more details and to assist you as you get busy on fixing this. I highly recommend the books by Suze Orman. But whatever steps you take, please remember this. Work on this with your spouse. Tackle this problem together. Join forces and be an ally to each other, don’t place blame, don’t be controlling or abusive, and use this as a tool to help with the rebuilding of your marriage. One thing you should know for sure, if you think you’re in a tough place financially right now, you cannot imagine how much more difficult it will be to get things under control if you divorce.