By Rebecca L. Mate

Since debt is more money going out than came in, the obvious solution is to lower expenses and increase income so one can whittle away at past bills. However, there are a few preliminary steps to take which address the fact that debt occurred in the first place. Without these steps, being in debt can become a permanent condition.

For best results, finish each step before going onto the next. Do them in the spirit of fun.

1. How high is the stack of bills?

Whether you’re looking at a QuickBooks bills summary, an Excel file or a stack of physical bills envelopes, determine the amount of old debt. Round it to the nearest large number, e.g. $5,789.23 would be called ”6.”

Next, round the amount of your monthly income, whether it is from dividends or payroll or yard sales.

Roughly figure out your monthly expenses, again, rounding it up.

Using the fictional Richmann family as an example, their monthly expenses are 12, their income is 10, and their past debt is 53.

2. Hire yourself as CFO.

Give yourself an official descriptive title for all your dealings with money, whether it is Family Chief Financial Officer (CFO), Family Finance Guy, the Money Man, the Banker, etc. and write it down.

Under this title, write down ALL the positions comprising that job.

Mr. Richmann calls himself Household Finance Manager. Within that position he is also Purchaser, Bills Payer, Collections Agent, Financial Planner, Financial Record Keeper, Asset Manager, Income Provider, etc.

3. Be the best money manager you can be.

Look at your overall post title. When Mr. Richmann is at his best or striving to be the best Household Finance Manager, who is he? Write down who you are and how you operate when you are at the top of your game, when you’re fully functioning as the post title you chose.

Mr. Richmann, as a world-class Household Finance Manager, is excellent at producing products or delivering services that bring in top dollar from customers. He banks all the money, he does planning with keen foresight to set aside a stash for future purchases, he allocates for current monthly expenses, he runs his family on a cash allowance basis so they can’t go over budget, he hides a little money away that he never spends, he can’t be fooled by cheats and he tackles his past bills in a way that takes them down one after the other. His family regards him as tough and unyielding, but they respect him when he comes home with the latest gadget he bought with cash.

4. Choose sides.

You now have a glimmer of an idea of how to play this money game to win. Don’t stop now, because you are in that gray area between being your financial friend or your own worst enemy.

Look at the flip side of the last step, the bad money manager, the things you did, your objectives and how that went. How bad did it get? Do you want to continue in that vein?

Now look at things from the perspective of the title you gave yourself. Have you had any large or small successes from operating in that way?

Make a decision to continue the past way or to do it the new (or old successful) way. Tell somebody. Do something real to prove to yourself you’ve truly decided.

Our friend Mr. Richmann determined that he was living too high on the hog with respect to his income. He realized that the nice house, the fast car and the fancy household gadgets were all attempts to impress his wealthy cousin. Now he sits with an income of ”12” and a debt of ”53.” His debt is climbing at a rate of ”25” a year and he’s afraid to answer the phone or open the door to bill collectors.

It wasn’t always this bad. Mr. Richmann, when just out of college, bought everything with cash and was debt free. He was smart about how he managed his money, something he learned when he had a paper route as a kid. He knows exactly what he did to stay solvent back then, and found that several of those successful things he had omitted over the years.

He decided to be even better as a Household Finance Manager than he had ever been, and told his wife and family what to expect. He proved it by collecting up all their credit cards and by giving them envelopes with a fixed amount of cash instead.

5. Choose your financial friends.

In this world, there will be people who want to rob you penniless and people who will help you reach financial freedom. Recognize your friends and sock it to an enemy.

Make it up to yourself and your family. Debt hurts. Heal the pain, until you, and your family, welcome you back into their good graces.

Mr. Richmann had the support of his wife and his son, but not his shopping spree teenage daughter. He encouraged his teen to get a part-time job to support her mall habit. He came to the conclusion that he’d only deal with salespeople and bankers who had his best financial interest at heart. Mr. Richmann saw he had a problem trying to keep up with his wealthy, show-off cousin. He invited him over for dinner and had a spirited discussion. The cousin backed off.

Mr. Richmann did several things to set things right, such as asked for a raise, cleaned out the garage, sold his favorite golf club to pay down a credit card, built a bench for his accountant friend who helped him improve his credit score and he treated himself to a nice steak barbeque when steaks went on sale.

6. Make your future bright.

At this point, knowing his financial situation, knowing his role and knowing who is on his side, Mr. Richmann is now ready to seek out experts and programs that will truly assist him to improve his financial condition.