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The First (And Most Important) Step To Fixing Your Finances

I have had many conversations with many people in the past who have inquired about how to get out of debt. Most of these people realize that they are in debt and that they do need to do something about it. Realization of the problem and desire for a solution is one of the all-important first steps, but there’s still a lot of work to do. With that said, some people out there don’t even realize that they will be “wallowing” financially for the rest of their lives if they don’t do something. For them, they need to start off by admitting the problem. However, for those that have made the realization, their biggest question is: Where do I start? What do I do first? What’s the best way to get going?

The Answer Is Simple

Most are pretty surprised by my answer. Of course, I usually throw the question right back at them and say “Well, what do you think the first step should be?” The answers are varied. Some say organize their bills, some say cut up their credit cards, some say eliminate all the spending that they can.

And the answer that I give to all of those responses is: Yes, Yes, and Yes!


That is because to me the most important first step that you need to take to fix your finances is that you need to do something. You need to act. For the most part, it doesn’t necessarily matter what that first action is; you just need to do it. You need to stop asking questions of yourself, stop pondering the mystery of getting out of debt, and start doing. I’ll say it again…you need to act!

Baby Steps

But of course, most people want more direction than that, and what I usually follow up with is this. Depending on your degree of debt, your first action could be one of many things. If you simply have a lot of credit card debt but really don’t have many expenses to speak of, then obviously you just need to focus on your credit card debt. However, most people that I speak to are in the same boat that I was. They are in some serious debt, and just have no idea where to begin.

In that case, I usually suggest baby steps. The phrase “Rome wasn’t built in a day” comes to mind. Baby steps are what I did in the beginning. Look at it this way. If you are in serious debt, it probably did not happen overnight. There are probably some pretty serious behavioral and spending issues that need to be addressed, and trying to do it all at once is probably not going to be effective. Therefore, I suggest starting small.

Comfort Zone

I’m sure you’ve heard of a “comfort zone” and if you’re going to get yourself out of debt, you most certainly need to get out of your comfort zone. And once again, trying to institute massive overhauls in your finances all at once will probably lead to nothing more than you giving up and staying in your current situation.

Honestly, I think the very first thing that I did was give up drinking Coke. I decided that this was an unnecessary expense and that I could do without it. Well, considering that Coke has caffeine in it, it wasn’t the easiest thing to do in the beginning. However, I stuck with it, gave them, up and before long, I had taken my first baby step which in this case happened to have a health benefit in addition to the financial benefit.


From there, momentum builds kind of like a debt snowball. After I saw that I could actually take a step in the right direction, I took a few more. Later, I decided I needed to stop going out to eat so much. I didn’t eliminate it, but I curtailed it quite a bit. Then, I decided I didn’t need any new clothes for a year. Before you knew it, I had some pretty good momentum going.


Before long, it got contagious. I started taking a long hard look at my “spending habits” and I eliminated a lot more stuff that I deemed unnecessary. I didn’t tell myself “forever,” I just told myself no more until I was out of debt. This thought process became contagious and soon after, I began to look at my bills and figure out ways that I could save on each of those. Then, how to save as much money as I could on the things that I still needed to spend money on. And the momentum continued to build.


The first thing you need to do to get out of debt is to act! Do something. Eliminate one thing from your life that you know that you can do without. Take one little step in the right direction towards financial freedom. More than likely you’ll see that this will lead to a second baby step, a third baby step, and more. Then, you might throw in there a few leaps and bounds and before you know it, you may just find yourself with a little extra in the bank at the end of the month.

As always, your comments and suggestions are greatly appreciated.

David Bakke
David started his own personal finance blog, YourFinances101, in June of 2009 and published his first book on ways to save more and spend less called "Don't Be A Mule..." Since then he has been a regular contributor for Money Crashers. He lives just outside Atlanta, GA and most all of his free time is taken up by his amazing three year old son, Nicholas.

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