“How do I get out of debt?”

This is one of the most common questions I have asked myself. And I’ve sat around with plenty of friends over drinks asking the exact same question. Sometimes it seems to be one that has no realistic answer. How do you get out of a $50,000, $75,000, or $150,000 hole when you are barely struggling at a job making $50,000 a year.

Let’s get past the scolding and assume that we have come to the realization that we should have never gotten here in the first place. No more lecturing is needed. We have torn up access to all credit cards, and we are no longer racking up the debt. This does not mean the debt is decreasing because the people who have lent us the money like to charge for it with a magical little fee called interest. So now we just have to watch the interest build up.

Awareness.

Are you aware of exactly how much debt you have? It is an overwhelming emotional burden to look at the numbers but we have to. You have to know exactly how many accounts you have, what the balances are, and what the interest rate is. I know this seems obvious but most people (including me at times) didn’t know and didn’t want to know. You may think “Why does it matter whether I ower $150,000 or $152,000? There is no chance of paying off either right now”.

But before you make any plans to attack the debt you really do need to know precisely where you are starting from. If you have to settle for a small amount it would be good to know how much of a deal you are getting. If you want to keep track of how much interest you are racking up you need to have the precise numbers. There are a multitude of reasons of why you want the exact numbers.

Here is my favorite though: I want to see progress. I want to know that I am slaying this dragon. To even begin to attack it I need to know how big it is. And I also want to know how big the remainder is when I take chunks out of it.

You need to measure so you can show progress and victories – even if they are small victories. I’ve made the mistake of estimating how much I’ve owed somebody only to have to come back to my tracking later and increase the amount. That is a very depressing adjustment to make. I’ve done it many times.

Please do yourself a favor. Attack this beast. Gather up all of your latest statements or log on to your online accounts and get the precise numbers. Track them in a simple Google Spreadsheet (Free) if you don’t have anyplace else. And make a point to refresh your balances during the first week of the month.

We’ll post part 2 soon of “How do I get out of debt”. Make sure you subscribe via RSS or email. Also follow @brokemf on Twitter.