There is no such thing as free money

Greetings readers,

If you are reading this around its original publishing date, then I would like to wish you a Happy New Year 2021! May you achieve your financial goals for this year and most importantly, stay healthy and take care of yourselves and your loved ones! With this out of the way let's get this 2021 show on the road.


In the previous post, we tackled the first step towards financial discipline: assessing your net balance position at the end of the month and committing to corrective actions. I hope this was a simple enough and somewhat useful exercise that would help you break the ice. If you need any guidance, feel free to comment on that post and ask any questions you might have. 

The next step I would recommend, before starting to do any budgeting, is assessing your overall debt position. The exercise of tracking your expenses should have already provided some relevant data that you can use towards your debt assessment, but that might not be entirely accurate.

What should be the goal you may ask? Simple: take stock of all your outstanding debt and list it. As previously, it can be as high or as low-tech as you want it to be. My particular preference is using some sort of basic spreadsheet to make it easier on the calculations and sorting. But anything works, don't let yourself get locked into the mindset that you need to do this via a spreadsheet.

Once you have all your debt listed you want to create 2 views with that information:

  • Sort the debt from short-term to long-term debt.
  • Sort the debt from smallest amount to largest amount.

This can look as in the example below:


What the 2 views allow us to see is what is our overall debt and how is this spread over time (yes, I know that the mortgage is paid monthly but we're keeping things simple for the moment). Now we clearly know how much it is due by next week, next month, in 3 months etc. and we also know what is the smallest debt we have. For most European countries the default type of credit card will be a secured one - meaning that it is directly tied into your debit account and your balance is repaid in full when it is due. Unsecured credit cards are more complex products and more difficult to get within the EU after the 2008 financial crisis, but they are more likely to cause rollover debt principals leading to considerable amounts of debt over time.

At this point you can see what is the minimum payment that you need to make on each outstanding debt items. This information is typically found on credit card bills, loan reimbursement schedules etc. Make sure you make those payments in time! If your monthly balance is still net positive, you have a buffer that you can use in the budgeting phase to pay off your debt sooner by making additional payments over the minimum amount. This is where the 2nd view comes into use as you want to psychologically start with the smallest debt, cross it off and then move to the next. This is also what Dave Ramsey refers to as Debt Snowball effect. If you don't know who Dave Ramsey is, he is a Youtuber and podcaster, who managed to build a successful career around helping people get their finances in order. 

If you're not single, do consider involving your significant other in your journey towards financial discipline. You can then make sure you cover all angles and also keep each other on track.

If you found it helpful, I would appreciate if you could give it a thumbs-up and feel free to leave a comment if this kind of content is interesting and helpful. Tipping is not mandatory but well-appreciated! 

Take care


The information contained herein is for informational purposes only. Nothing herein shall be construed to be financial, legal or tax advice. The content of this article reflects solely the opinions and beliefs of the author, who is not a licensed financial advisor or registered investment advisor. The author strongly recommends that you perform your own independent research and/or speak with a qualified professional before making any financial decisions.

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Happy Hour Finances
Happy Hour Finances

This blog aims to tackle personal finances matters, from the more basic concepts that can be applied in every day life to slightly more advanced concepts that require a certain degree of being intentional with improving your finances.

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