By: Jeena Cho

When I was in law school, they opened a Starbucks in the student union. Instantly, I was addicted. Every break between classes, I would wonder over and order a venti soy Mocha Frappuccino. It was just the “cool” thing to do. After about a month of this bad behavior, I noticed two things. 1. I didn’t have money for groceries and 2. I was craving more Frappuccino. Initially, I thought someone had stolen money out of my account because the bank balance was much lower than where it should have been. After a little investigation, I was horrified at the fact that I had wasted my precious grocery money at Starbucks! Even at 2 cups a day at $4.75, that’s $285 a month!

I spent the next month tracking every dime I spent. Not just money I spent on Starbucks but on food, eating out, entertainment, clothing, etc. It was a real eye opener because I didn’t realize where my money was going. Once I figured out what I was spending money on, I set rules for myself. I didn’t stop going to Starbucks, but I set a budget for 1 Tall brewed coffee 3x a week. Hence, I reduced my Starbucks spending from $285 to $18.

The moral of the story? In order for you to figure out the the solution, first, you need to identify the problem. If you are feeling overwhelmed by debt, there are three things you need to figure out.

1. How much debt do you have?

Surprisingly, many of my clients have no idea how much debt they have. If you don’t know, it’s time to face reality and open ALL of your bills. Will it be painful? Probably. But this is the first step in looking out for #1 - you.

2. How much income do you have?

Sounds simple, right? Look at your pay stubs. This is true for most people but if you are self employed and operate your own business, it may not be as easy as it sounds. If you have not been keeping a P&L statement, it’s time to do so.

3. Where are you spending your money?

Do you know how much you spend on Starbucks? How about groceries? Eating out? Try a little experiment and spend 4 weeks writing down every single thing you pay for. I mean everything. Every cup of coffee, pack of gum, newspaper, etc. If you’ve never done this, you may be surprised at the results.

Once you are armed with this information, you can make an informed decision about your financial situation. Look at your budget and see if there are areas where you can “trim the fat” and if that will be enough to get you out of debt.