There's nothing like being laid off, getting a call from the bank saying you've bounced your account to the moon or in my case (back in the '80s) hearing that your home is about to be foreclosed to tell you that you need an extreme money makeover.
BEFORE PICTURE. You need a great "before" photo for any makeover to be worth its salt. A snapshot of your personal finances is called a statement of net worth — a summary of how much money you will have left after subtracting your debts from the value of your assets.
YOUR ATTITUDE. Face it: The only thing you can control is your attitude, the way you choose to respond to life's challenges. This financial hardship is just a season in your life. It has come, and it will go; it's not forever. You can handle anything as long as you know it's only temporary. Choose to face your extreme situation with an equally intense reaction.
MAKE A PLAN. Write out a simple plan for how you will reach your makeover goal, keeping in mind that a good plan is specific, reasonable, realistic and finite with measurable factors. Choose a date by which you plan to have completed your makeover. Then, create stepping stones leading up to the date so you can measure your progress.
FREEZE SPENDING. Yes, it's extreme, but then again so is your makeover. Freezing your spending for the next week or two will give you the jump-start you need. Then, transition to a non-essential spending freeze (during which you'll only buy items you absolutely need) for the foreseeable future.
TRACK SPENDING. Starting now — today — keep a written list of your expenditures. If you spend a dollar it had better be accounted for on paper. That is how critical tracking will be for a successful makeover.
STOP DEBTING. OK, "debting" isn't a real word, but it should be. To debt means to use a credit card to the point of creating debt. This has to stop because of its negative effect on your net worth. No more debting.
START SAVING. Putting away just five bucks a week will change your attitude about living frugally. Money in the bank offers a kind of security that is difficult to describe. The more you save, the more willing you will be to find ways to save even bigger and better.
SELL ASSETS. Unless you use an asset regularly or it's a cherished family treasure, selling assets for cash is a great way to return from the powerful financial hit that brought you to your knees. Use the proceeds to catch up on your bills, start an emergency savings account or pay down a debt.
DOWNSIZE. If you are in over your head with a mortgage or you're living in a place where the rent is beyond reasonable, move to a cheaper place, or get a roommate. Yes, it's a drastic measure. But it may be exactly what you need.
GET ANOTHER JOB. You may have to work nights and weekends right now. It won't be forever. If a part-time job nets you an extra $400 a month you'll have $4,800 in a year to put toward your makeover.
GIVE UP A VICE. At $22 a pop, giving up your weekly manicure habit will save you $1,056 annually. Emery boards and nail polish are cheap. Or, curtail your visits back to once a month. You'll still save $792. Other vices like cigarettes, short cab rides and fancy coffee drinks are huge money drains.
SELL A CAR. Add up what it costs you to operate your second car (gas, monthly payment, maintenance, insurance, registration and car washes) and it won't be so difficult to live without, at least for a while.
The relief you will feel after going to extreme lengths to deal with your financial situation will far outweigh the temporary discomforts. I'd love to know how you are doing with your makeover. Write me at the address below.
Mary invites questions, comments and tips at [email protected], or c/o Everyday Cheapskate, 12340 Seal Beach Blvd., Suite B-416, Seal Beach, CA 90740. This column will answer questions of general interest, but letters cannot be answered individually. Mary Hunt is the founder of www.DebtProofLiving.com, a personal finance member website and the author of "Debt-Proof Living," released in 2014. To find out more about Mary and read her past columns, please visit the Creators Syndicate Web page at www.creators.com.