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The First and Most Important Step when Attacking Your Finances

in Money Basics, Pay Off Your Debt, Videos

[Reading by email? Click here to see the video!]

Back on video… whoo-hoo!

For the past few years, if you’d of asked me what the first step in getting out of debt or attacking your finances was…  I would have replied, “Recognize that you have a problem”.

Bor-ing! And sort of lame.

Not that it’s not true.  Recognizing a problem exists (on whatever level) *is* one of the most important steps, but I no longer consider it to be the first step (or the most important step).

Instead, I’ve realized that there is a much more important component and one that I believe is far better to start with.  I’d tell you here… but then you’d have no reason to watch the video!

Compelling breakdown of the video:

  • [0:00] – Excited to be back on video, introduction to the topic at hand!
  • [0:55] – My old, safe, lazy response when asked what the first step in paying off debt is.
  • [1:20] – My big issue with my old answer and why I’ve come to realize it’s flawed.
  • [2:10] – The new, more powerful first step when attacking finances.
  • [2:55] – The ability for specific, passionate goals to help pull you through the slip-ups.
  • [3:40] – Courtney and I have gotten lazy in our finances & what we plan to do about it!
  • [5:00] – Call to action: Take the first step to start the offensive in your financial life.
  • [5:30] – Nobody gets out of debt because it’s “good for them to do”.  Get specific.

What do you think? What is the first step someone should take when attacking their finances?  What worked for you?  What failed?

Let me know!

{ 32 comments… read them below or add one }

The Yakezie August 23, 2010 at 12:35 PM

All about mindset! Good to hear from you again Baker. Looks like you’ve lost a little weight and grown some hair. Those are two things a lot of guys dream of I think! :)

Best,

Sam
The Yakezie

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Baker August 23, 2010 at 1:01 PM

Haha, thanks Sam! It’s been awesome to see the evolution of your Yakezie network. Keep up the good work!

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Diane August 23, 2010 at 1:18 PM

No offense, but I’d rather read than watch a video. I’m a visual learner.

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Baker August 23, 2010 at 1:24 PM

None taken! This is why I post with several different mediums. So people with different preferences can enjoy the community.

Thanks for feedback!

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Wojo August 23, 2010 at 4:30 PM

What about transcribing like ProBlogger? I really like that approach in case I’m somewhere where I can’t watch a video! Just a thought…

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Candice August 25, 2010 at 2:20 PM

Agreed.

The computer I’m on doesn’t even let me watch videos (this is on top of an incredibly outdated browser and no speakers – why does this place even have an IT department if they don’t do anything?? I’m digressing…). To be honest, I read your blog on my work breaks. I can’t see/hear the videos. Sure, I could go home after work and watch it… but once I go home I want to do something other than sit on a computer. So the chances of me actually watching this is slim vs. if you had a transcription or something of the video I’d be able to read it here at work and know what the video was about.

Just my 2 cents…

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Baker August 26, 2010 at 10:42 AM

Thanks, guys. I will *definitely* be going to transcription, I just haven’t put the time/energy into testing it out yet.

I’ll be sure to prioritize that before I do the next video! :-)

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Suzanne August 23, 2010 at 1:19 PM

I think the first step is to lay it all out there….income, expenses, basically create a budget. If you don’t know where your money is going it can be tough to keep track of it and even realize you have a debt problem. If you are spending more than what you are making you are probably using credit to make up the difference. Pay down the highest interest debt first and so on until you are debt free. Expenses still too high? See where you can cut. And if you still can’t make it consider a part time or side job to knock out your debt.

Great informative video! Thank you for sharing!

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Baker August 23, 2010 at 1:27 PM

Great suggestions, Suzanne. I agree that “laying it all out there” is the first *tangible* step to solving the problem. But I know firsthand it can be a big chore! Having that passionate, specific goal while give you the fuel to get over this inevitable hump! :-)

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Nick Laborde August 23, 2010 at 1:19 PM

“Sexy Goal” I love it, having something sexy to go after is always good thing.

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Baker August 23, 2010 at 1:24 PM

Hehe!

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Rob Ward August 23, 2010 at 1:37 PM

Baker, this is spot on. It is definitely easy to say “I have a problem.” So what?! Why do you want to fix it? Even for my wife and I who for the most part have managed our finances well still need to remind ourselves why we are trying to pay off our debt.

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Baker August 23, 2010 at 2:08 PM

That’s why I love it! It helps both people who *do* have serious problems and those of us that just tend to get lazy or stagnant from time to time. :-)

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Joel Runyon August 23, 2010 at 2:07 PM

Baker -
Spot on. Good to start seeing more of you again :)

Matt Gartland from Healthy Lifestyle Design hit on this in his ebook Fearless Health. He had a great graphic he let me put up in a review on the unconventional way to make decisions that is really effective. (http://www.joelrunyon.com/two3/the-power-of-why)

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Techbud August 23, 2010 at 3:48 PM

Keep your eye on the prize. The goal helps you stay focused, it’s important when paying down debt and maybe even more important after. You don’t want to fall back into habits that got you into a bad situation in the first place.

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Baker August 26, 2010 at 10:41 AM

Great point, Techbud!

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Baker August 26, 2010 at 10:41 AM

Great point, Techbud!

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Wojo August 23, 2010 at 4:34 PM

The first step has ALWAYS been “admit you have a problem,” with everything it seems. But what you’re saying makes 100% sense. I wonder how many alcoholics, gambling addicts, etc. would be helped if they applied some of this thinking (if they’re resistant to admitting their “problem.”)

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Baker August 26, 2010 at 10:43 AM

Yeah, I immediately thought about how many other situations this could be helpful in.

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Eric | Eden Journal August 23, 2010 at 6:54 PM

Setting a goal is a good first step. Our goal was to pay off our debt so that my wife could stay home with our daughter after she was born. That was a huge goal and it kept us very motivated to pay off our debt and start living below our means.

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Dena August 24, 2010 at 3:23 AM

It’s good to see you back posting.I’m subscribed by email.Sadly,I can’t watch the video.It must be a technical blooper.You asked what works for us.I just want you to know that your advice worked for us.We will have nearly $7,000 in our emergency fund on December 31.That is amazing to me!! We had to dip into it once this year.But we were so happy it was there.

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Baker August 26, 2010 at 10:45 AM

Whoo-hoo! It’s excited to hear I helped play a small role. :-) Nice work!

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Lop at Rebates Money August 24, 2010 at 1:18 PM

You are 100% right about identifying your problem as the most important step. E.G, you can always try to help people get out of debt by giving them money, but eventually they will fall back into debt because of their spending habits. Unless, they can identify with the problem, people will never change.

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Asa d'Fonlkls August 24, 2010 at 3:55 PM

I enjoy your blog, and this video really shares the enthusiasm you have for personal finance. But it was too extemporaneous, so it didn’t hold my attention beyond 2:30. That’s unfortunate, since that’s right around where you get to the meat of what you’re trying to tell us.

I hope you’ll turn the core content of this video into one of your blog posts. I wasn’t able to connect with the information you were trying to deliver: there seems to be a big gap between your writing (very well done, presumably with numerous drafts) and your video planning (too off-the-cuff for me).

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Baker August 26, 2010 at 10:47 AM

Asa, thanks for the wonderful suggestions/feedback. This is the perfect example of constructive criticism. That seems to be a lost art these days!

I’ll tie this content into a written post coming up and also work on closing the gap between my written work and video work! Thanks a ton!

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Antar August 25, 2010 at 8:19 AM

Great post!
I’ve got some debt problems myself and I’ve done the practical steps about how to get rid of it. I’m doing ok, but fall back when times get tough. Attaching an emotional goal to my financial problem makes so much sense to help out when things get rough. Time to do some thinking… a sexy goal sounds pretty good too! hehehe

By the way, great blog Baker. I continuously follow it. Your posts have helped me tremendously to know how to tackle my debt problem!
Cheers,

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Baker August 26, 2010 at 10:47 AM

Antar, thanks man. I really do appreciate having you along for the ride!

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Deb G August 25, 2010 at 2:36 PM

Great post! For me, the first step would be to stop spending immediately and start tracking your expenses. I wrote a blog yesterday about “frugal” being the new F-word. I was surprised that it made it to WordPress’ front page (Freshly Pressed) and just how many people commented on how being frugal has made their lives better and richer (no pun intended!).

Thanks for the great ideas!
~WinkBlu

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Dustin Stevens-Baier August 29, 2010 at 4:05 PM

I actually use this method pretty regularly but never thought about it before. My wife and my goal is to move to Austin so we have been really focusing on paying off debt and growing our passive income. Thanks for the motivation video!

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Leigh August 30, 2010 at 2:51 AM

i’m curious but can’t stream the video. (one of the snags of living in a developing country.) maybe you could offer a hybrid post with both the video and some text for those of us who want to hear what you have to say but can’t do videos.

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MikeTheRed August 31, 2010 at 8:47 AM

Adam,

I think you hit the nail on the head! I was struggling with credit card debt for years and kept saying “I need to get out of debt”. Unfortunately, that was the extent of the goal. It wasn’t until I met my wife that I had a powerful emotional reason to push me to get out of debt. I set a goal for myself that I wouldn’t propose to her until I had paid off the last of my credit cards.

And that is what got me through the low times, the times where I was convinced I couldn’t ever finish off the debt. I kept reminding myself what it was I was working for, and it carried me through.

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Thandie November 22, 2010 at 1:49 PM

Thank you for the inspiring and wise words. I’m in the middle of my debt elimination journey and its a slow frustrating process. Thinking about what you’ve said, I think one of the reasons I got into debt in the first place was because I “didn’t” have a goal. Now that I’ve met someone that I want to build a life with, I feel even more driven to be debt free so that we can buy a home and start a family.

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