In Debt or No Money to Pay the Bills?

In an effort to create the perfect budget for myself that would help pay down my debt as quickly as possible, I discovered that I was more than in debt - I was broke! My monthly bills, not necessarily the "essential" expenses or liabilities, but the utilities, cable TV, Internet Connection, the mortgage - stuff I can't pay off in minimum payments - totaled to more than my monthly income. And, the sum wasn't just a few dollars over my monthly salary; it involved a couple hundred dollars! This was a depressing revelation. I've felt even more demoralized than I was when I first resolved to get out of debt.

How am I supposed to create a budget from negative income?

At first I thought that I couldn't do away with any of these monthly payments. I mean, I've gotta have power. I can't do without water. My family and I just moved into this house a year ago. We're not moving out of it. We gotta have a phone. We can't do without cable...Wait! Yes, we can live without cable. And, I could certainly live without the extra fee for text messages on my cell phone bill. There are things I can cut out of my monthly expenses after all.

So, once again, my presumptions about this project surprise me. A budget doesn't just involve planning with the money you have. It can force you to acknowledge how much money you don't have. In my case for example, a budget first requires a serious purge process in order to set me on the path to a debt-free life.

I checked out Start Late Finish Rich from the library yesterday. Its author is David Bach, the originator of "The Latte Factor ®" and major force behind Oprah's Debt Diet. I've read the first third of the book and feel inspired, which is good, because, as I see it, that's the guy's job. A lot of it is the usual motivational seminar lingo. But, it's helpful to absorb some of that, at least for me at this time, in order to get me pumped about getting out of debt again. Moreover, Bach helps outline the steps I can take to really pay down my debt more quickly than the credit companies would like. And, finally, he emphasizes saving money for the future at the same time.

My action item for this moment is to consolidate my high interest credit card debts into one low interest card and pay it off fast. Given my lack of confidence in my financial ideas, I'd been questioning this solution for a while without doing much about it. But, Bach explains it in a way that puts me at ease. So, I've been comparing credit cards recommended for balance transfers today.

However, there's a tempting offer for a personal loan from a reputable bank with an interest rate of 6.99%. The loan amount can be from $5,000 to $30,000 and have a payment schedule from 2 to 7 years. I wonder if this would be a more viable option than transferring my balances to another credit card. Granted, the new credit card might have an introductory rate 0%. But, there's no way I will pay off my balance in less than a year. And, that leaves me searching for a new card to which I may transfer my balance next year and so on until I pay of the debt. It's my understanding that numerous new credit cards will more than likely screw up my credit score.

So, I'm thinking the single personal loan from the bank will be a wiser choice. I've conducted some searching on the 'net for opinions about consolidating debt with a personal loan. And, there are many warnings. The primary concern seems to be that those taking advantage of such a loan to pay off debt will not correct their spending habits in the long run. But, being the resolute kind of guy that I am, I feel that I'll have the will power to avoid such a pitfall.

I'm still weighing my options on this though. Getting out of debt is no small matter. And, choosing the wrong way to get out can cost me even more. So, I'll let you know what I decide next time.