The 2 Types of People when it comes to Debt
Posted in Skills and habits on January 28th, 2010 by Christiaan – 3 Comments
Like so many students I have a student loan, it’s not pretty but it’s there. It’s a statistically sound assumption to say that you have some form of debt too. Especially if you live in the USA. Although I don’t know my exact amount of debt to the cent that is a figure that keeps haunting me. But you know, there are two types of people with debt:
- Those who are fully aware of their financial situation
- Those who have a vague idea at best
Either you know you have a debt, how big it is, and what it’s doing from week to week or you have no insight in your financial situation. The reason I don’t know my exact debt is because I’m not to good with numbers. A click of the mouse will bring me to GNUcash. A totally free accounting program (Linux, Windows and OS X) that lets me keep track of every single cent I spend, earn and is otherwise added or subtracted from my assets and liabilities.In big red numbers is my student loan, down to the last cent. GNUcash lets you keep track of everything, in as many categories as you deem necessary. Form big ones like that student loan down to small ones like cash you find in the street. (Do you leave free money on the ground? I sure don’t!)
Keep track
As mentioned in “Your money or your life” it’s vital to “keep track of every cent that comes in to or goes out of you life”. It’s so important that on one page alone it’s printed three times, in bold. (Page 67 if you want to see) and I couldn’t agree more. The benefits are clear:
- You’ll never wonder at your balance again, and have no idea where it all went
- You’ll know exactly how much came in this month and how much was spent
- These two combined let you see if you live below your means
- You learn where your vices are if you have them.
Setting up GNUcash takes a little bit of time and the learning curve is a bit steep in the beginning but it’s a really easy program after the initial setup. No fancy layout, it’s minimal and does only what it’s supposed to do. You can generate graphs for just about anything but the most useful one is income vs expenses. Three collumns per period show you how much came in, how much went out and the difference. If the difference is chronically negative you’re having a serious problem. if it’s always positive, you’re living below your means. This is where you want to be for it’s no more than common sense to spend less than you earn right? The amount you don’t spend you can save for a rainy day or pay off that debt. If you manage to live below your means habitually your debt will decrease and in time you will no longer be haunted by that negative figure. Knowing your ghost makes it all the less scary.
If you have no clear idea on your financial status: Start keeping track as of today!
(Yes, every single cent)
I promise you, although it’s hard at first you will get better at it and soon it will become a habit, a very healthy one.
Some more reading:
The Four Noble Truths about Money
