If you are like me, you probably don't really realize where your money is going until you write it down. I was using Microsoft Money for years, only tracking my checking account. I knew I was making payments on my credit cards and other loans, but I really didn't grasp where my money was going. I begin to use other money management software and actually linked by credit card accounts to the software. In one month alone, interest and fees accumulated over $1000.00. On a monthly income of $5000.00, you could easily see that I was bailing water out of a boat with more leaks popping up daily. Most of the credit cards I have charge 39 dollar late fee in addition to the ungodly monthly interest rates at 18%. Multiply that by seven, add in the normal bank fees, you can quickly see how my little row boat was being hit by full blown tsunami. Of course, if I had planned and saved better in earlier years, I wouldn't be where I'm at now. One thing to improve your situation is negotiate your fees with your bank. The bucket I have chosen to bail water with is a debt management plan (DMP). There are pros and cons to this measure, but my thoughts are credit is going to be very stingy to come by for the next couple of years and if I didn't do something quick, my kids could be kissing college good bye. I know it will reflect on my credit report until I come out of it, but again my boat was almost under anyway and credit will be extremely tight. The other benefit of going this route is I have accountability built into the system. Most people can start on the new budget process, but it is so hard to continue following it without having their feet held to the fire. The DMP will do that for me, plus cut the time of eliminating debt paying only the minimum from 26 years to just under 5 years. Of course, I'm in severe trouble and more than one person has recommended bankruptcy. I totally discounted the idea of bankruptcy as lasted longer on the credit report and did not fit with my religious beliefs. Again, the way I'm bailing water out of my ship may not work for you (may not work for me), but that is the beauty of going on this journey together.
Another thing by writing down how you spend your money or itemizing it, is you find out you spend your cash. So many times our financial boat takes on water because we allow ourselves to spend money in small amounts. "It will be okay if I get a drink out of the machine or stop and get a biscuit on the way to work." If you stop and write down every dime you spend, not just cash withdrawals from the ATM, you would be amazed at the amount of money you spend. You truly find out where your money is going.
As Robin Williams' students in Dead Poet Society called out "Captain, my captain", be bold, be brave, and keep the boat afloat!