Drowning in bills, behind on payments, and not enough income each month. This sounds like a nightmare, but it is a daily reality for many folks.
Being in debt is something most people discover they have a problem with, but don’t want to talk about. This makes the problem worse, and when you can’t focus on what you’re doing, it’s harder to get out of debt.
If you believe you’re dealing with debt but don’t know how to get your life back on track, check out these eight steps. They’ll make life easier and help you put your account back in the black.
1. Admit that Being in Debt is a Problem
Admitting that you have debt is a difficult problem for many people. From individuals that grew up without much money, to those that are wealthy and have shopping addictions, debt problems can affect anyone in any social class.
Before you try to solve the issue your debt caused, understand that admitting there is a problem is the first step. Once you’ve acknowledged this, you’ll get ready to buckle down and seek ways to get rid of your debt so you can live life without feeling consumed by money again.
2. Look at What Debt You Have and Plan Where to Chip Away
The first step to take when dealing with managing debt is get together everything you owe and figure out how you’ll begin the process of chipping away. Figure out what debts you owe and which ones you’ll pay the most off of first.
Gather together all bills you owe such as:
- Credit card bills
- Medical bills
- Student loans
- Personal loans
Don’t forget about reoccurring debt too, such as your rent, phone, utilities, and insurance. Although you won’t be able to do anything about these as you chip away, it’s helpful to know how much you’ll spend on debts every month.
3. Get Credit Reports to Better Understand Your Debt
When dealing with debt, it’s helpful to see what your score looks like and who are your various creditors are. You can do this by ordering a copy of your credit report from one of the many credit agencies.
You might have old debts that were never handled or you never knew about. Medical debt is a common instance where people lose track of debt or don’t know how much they owe until they get it in writing.
Once you have the full story of who you owe money to, you can start the process of debt repayment.
4. Begin With Snowballing Your Debt
Snowballing debt payments is a common theme that many financial advisors suggest. That’s because it’s easy to get rid of debt and focus on your smallest debts bill by bill until you’ve paid off everything.
The method works by gathering together all your debts and finding out which bill has the lowest amount of total money owed before it’s considered paid off. You then focus on putting larger sums of money toward that bill, while still paying your other debts.
The result is you eliminate one debt, so you can begin the process of focusing on others. Many people report success when they do this and find it easier to get ahead.
5. Get Help So You Don’t Gain Any More Debt
Sometimes it’s hard when you’re managing debts and you feel as though you’re going to drown in all the bills you owe. There are companies out there that can help you combine your debt, and ensure you don’t end up with any other late fees or expenses than if you’d gone without the company.
A company such as The Credit Review buys your debt, and then you make payments to the company. They are usually lower and more in line with your budget the original debt you owed to.
6. Address the Psychological Reasons Behind Your Debt
For some people, there is a reason why they’re in debt. Many folks find themselves the victims of death, divorce, or lose their job and have trouble finding alternative work.
Sometimes the reasons behind debt become more complicated and include becoming a shopaholic. Similar to binging on alcohol or drugs, someone with a shopping problem keeps purchasing even when they don’t have the money to do so.
If this has happened to you, make sure you seek help from a psychologist or even a 12-step program. This ensures your debt problems don’t come back to haunt you.
7. Find Inventive Ways to End Debt Sooner
If you’re dealing with debt and don’t want to get plagued by it anymore, consider earning extra money that you can throw down on your debt. This includes anything from taking a second job and delivering pizzas, to making a passive income stream and selling products online.
The extra money will come in handy and you’ll feel glad you’re taking an active role in erasing the debt. The best part is, once you’ve handled your finances, you can choose to quit or keep working and earning extra.
8. Understand Getting Out of Debt Takes Time
One of the most important things to remembering about handling debt is that it takes time. The process did not start overnight and it takes time to pay it down.
Know that as long as you focus on paying back your debt, you’re doing everything you can to put a stop to the cycle. If you start feeling discouraged, just remember that this too, shall pass, and you’ll become debt-free again.
The process to pay off debt is a long one, but with patience and perseverance, you’ll succeed. Being in debt might seem overwhelming, but there things to do that make paying it off feel simplified.
If you’re looking for more financial advice, check out our blog on which debt to pay off first.