inventorying debt i.e. regaining control

Disorganization will clip your wings

You get your paycheck, you want to pay back the friend you borrowed money from last month, and you're just about to call them when you get a text — it's a debt collection agency. Right! Another delay, and on top of that, there's the mortgage, phone installments, and what about the bills?

Does this scenario sound familiar? In thousands of homes, this is what daily life looks like. Jumping from one fire to the next. Total chaos.

No matter how good your intentions are, you won't get anywhere without knowing the details. Not to mention having control over the situation. Without a comprehensive understanding of your debts, you're leaving things to chance. That's why today we're going to systematically inventory your liabilities.

What debts do I have?

We'll start with the simplest part. Open Excel or another spreadsheet — you'll soon see that doing this on paper makes no sense at all. List all your debts one after another. Without any details; we'll get to those in a moment. Recall every single obligation you have, even the smallest one.

What kind of debts might you have:

• mortgage;
• home appliance installments;
• credit card;
• personal loan;
• car lease;
• payday loan;
• loan from family or friends;
• overdue rent and utility bills;
• unpaid fines;
• alimony;
• tab at the local corner store; etc.

These are just examples. There could be more, as compulsive debtors are very creative when it comes to where they get money. Of course, a complete list should have been created when calculating your net worth. If you haven't done that yet, go back to the previous lesson.

Breaking down your debts

As soon as you miss a payment deadline for one obligation, the problem grows. It will only get worse with each subsequent one, all due to a lack of organization and a repayment plan. You need to regain control of your finances, and that requires specifics. And this is exactly where your spreadsheet will start to fill up with them.

The more you know, the more you can control, so go through your loan agreements, documents, payment reminders, or other sources of information and find the following data:

• Type of debt; is the first part of this material — listing your liabilities. You just did this a moment ago.
• Creditor; who you owe money to — the name of the bank, loan company, etc. If you receive a payment reminder or any other form of contact, you will quickly be able to identify which debt it concerns.
• Debt amount; how much you have left to pay off. This makes it easy to sum up all your liabilities. It will also give you a clear picture of which debts are worth tackling first.
• Annual interest rate; this allows you to compare debts and identify those that are draining your wallet with the highest interest.
• Remaining number of installments
• Minimum installment amount; this information allows you to determine the minimum monthly cost of all your liabilities.
• Payment date in the month; the basis for creating an appropriate payment schedule.
• Are you behind on your payments? Do not split the statement into two lists; instead, mark it in a separate table—this will make sorting your spreadsheet easier.
• How many days overdue? The longer the payment delay, the greater the trouble.
• What is the amount you are late on?
• Option to defer payment; Does the agreement include a payment holiday? If so, does it come with additional costs? A free suspension of debt repayment will help you free up funds to pay down other obligations.
• Is a debt collection agency or a bailiff involved? As long as the debt isn't significantly overdue, the creditor is usually more lenient. A collection agency will be persistent, and a bailiff will simply seize your account—which is why it's best to reach an agreement with them. Do not avoid contact or ignore calls. On the contrary! Show that you have a repayment plan and take the initiative. You will stand out from difficult debtors, and you might even be able to negotiate a new repayment schedule.
• Are there already penalty interest charges or late payment fees?
• Who was the debt taken out for? For yourself or someone else? It happens that we take on debt for a loved one because they lack sufficient creditworthiness.
• What was the purpose of the debt? This information doesn't affect your repayment, but since just looking at it hurts right now, there's a chance you won't make the same mistake next time.
• Comment; anything you'd like to add yourself. You can write down how you're feeling or how much you regret your decision.

The better you describe your debts, the easier it will be to create a plan to overcome them, which we will cover in the next article.

Does just looking at the list make you grit your teeth in frustration? Yes, it's a time-consuming task, but it's definitely worth doing. You can't just do this in your head because not only is memory unreliable, but you'll also be susceptible to emotions, which very often cloud the best solutions for debtors.

What does this give you?

Without any analysis, just what the spreadsheet shows you—a basic set of information:

• Total amount of debt to be repaid.
• Total minimum monthly payments.
• Total amount of overdue debt.

However, Excel doesn't know what can be done with the rest. And there is a lot you can do. But you've already done a lot. Take a break, and in the next article, we will turn all the information above into an effective action plan.