Debt is a part of life for many Americans. Whether it's credit cards, student loans, a car note, or a mortgage, it piles up. If your debt has become a problem, something that keeps you up at night or crowds out all other thoughts when you get up in the morning, you may need some debt-coping techniques. You can deal with your financial problems responsibly and get out of debt. Use these debt management tips and tactics to help you get out of debt.
- Don't freak out. I have been watching a lot of Oprah lately, and a recurring theme on her money-related shows seems to be the enormous emotional burden that being in debt, especially sizable debt, puts on the debtor. If you're one such overburdened person - and hey, we've all been there - consider how your attitude may be slowing down your financial recovery. Many people work well under pressure, but few work well under feelings of panic, being overwhelmed, or being obsessed to the point of paralysis. Think of your debt problems as something to be corrected over time, not as a giant meteor careening from out of space aimed directly at your house and family. A calm mind and a rational approach to problem solving is going to get you a lot further than white-knuckled freaking out and fear-based inaction.
- Get some perspective. I have quite a bit of debt and it's going to take me a while, perhaps, to shovel out of it. But I still consider myself quite a lucky person. Why? Because my debt is what I call "non-life-threatening." I'm not hungry, homeless, or on the run from a bookie. I don't have to skimp on my kids' medicine to pay for their dinners - partially because I don't have kids, but also because I have some income. I also have friends and family, my health and an education, and I live in a society where I can pursue pretty much any career I like, within reason. In other words, despite debt, I have it pretty good.
Now, if you are in a situation where your debt problems are affecting your ability to provide for your family or feel secure in knowing you'll have a place to live next week, or if your finances are causing real pain in your relationships, you have a right to be very upset and focused on your debt problems and probably need professional debt help to recover and pay off debt.
However, if you're like me, and basically you just have a meltdown every so often because your credit cards are maxed out so you can't charge something at a store, or you're tired of seeing your disposable income being disposed of by your student lender, then one way to manage your debt problems is to, in a word, chill. Get some perspective; limit the amount of time and energy you're going to allow yourself to spend on your money. Do this by counting your blessings (the things that matter) instead of mulling over how high that interest rate is on that computer you bought three years ago and never fully paid for. And realize, compared to 99% of the people in the world (well, let's say 97%), you've got it pretty good. Perspective can be very important in a society that's turned basic middle class credit card debts or hefty student loans into a superhuman catastrophe. It can stink, but it is also in your power to decide how much of your life is going to be spent centered on the subject.
- Plan and act. Sometimes problems don't need momentum to snowball. Sometimes, inaction can be enough to make things go from bad to worse. If your way of dealing with debt problems is to throw up your hands and say, "I can't fix this," then between late fees, finances charges, and continued spending, your problem can potentially get worse every day. So make a plan of action. In fact, make several.
First, make plan to stop the bleeding by knowing how much you earn per month and how much you spend and pay out per month. Where is your money going? What can you cut? Be detailed - spending on coffee and a muffin counts. And be tough on yourself - coffee and a muffin may need to go.
Second, make a plan to hack away at that debt. Figure out exactly how much you owe and determine your interest rates (don't hesitate to call credit card companies and ask for lower rates). Then figure out which card or debt you want to pay off first. Sometimes paying off the smallest balance provides a momentum-building boost. It probably makes the most sense to attack the card with the highest interest rate because, ultimately, the higher the rate, the more you're paying beyond your actual principal.
Also, see where you can start paying more than minimum balances now that you have a new, tight spending budget. Planning and then acting to stop overspending and to start whittling away at your debt a bit at a time will make debt less of a problem and more of a project that you - at least to some extent - control.
- Get some help. The truth is, sometimes debt problems are too big to handle on your own or even as a couple or family. You may need professional advice. No, I'm not saying you should get in the phone queue for the Suze Orman show, though feel free if you wish. But you might want to consider speaking to a financial planner or a debt counselor. As with buying any service, check credentials, costs, reputation, and services offered before signing on the dotted line. There are people, unfortunately, who would like to put you deeper in the hole under the guise of helping you or "consolidating" your debts. Often even the "Non-profit" in a company name can simply end up meaning it doesn't profit you to use their services (see the link for advice on finding a good credit counselor...). To find a debt counselor or financial planner, surf the net, check the yellow pages or even speak to a friend or family member who has been in a similar situation.
You can deal with your debt problems if you take control, have a plan, follow through on it and, if needed, ask for some help along the way.