Whether it's a serious problem that keeps your family walking a financial tightrope or just a nagging inconvenience that's keeping you from experiences you want to get out of life, debt can really be a factor in your quality of life. If you feel stuck, I hear you. I've been in, am in, and will probably continue to be in.....debt. But here are some things that have helped me improve my financial lot (a little) over time. Most of them I have gleaned from television, friends and family, or trial and error. I hope you find them of some use.
- Take control. One of the big things I've noticed about debt is, when it annoys me the most is when I feel like it's out of my control and running my life. You know, when you feel like the credit card companies know they've got you, and the student loan people are just waiting at the door for you to run out of time? The powerless victim feeling can really make debt a lot worse than it actually is (which takes a lot...), and it can also keep you from winning your financial freedom back. Feeling overwhelmed, crying in your bill pile, or cursing out the latest interest rate hike your least-favorite creditor just issued is not just making you stagnant, inactive, and ineffective in relieving your debt. It's also causing you to give over time, energy, and power to an inanimate object, debt. So, to get out of debt, I suggest first having a good attitude: This is something you're going to work on to fix. This is something you can handle. You're in charge, not the debt. The mental game is half the battle. Take charge and don't let debt run your life.
- Know the numbers. Continuing with the mental part of getting out of debt: Don't fall prey to denial or to being overly doom-and-gloom when it comes to debt. Getting out of debt means spending and paying things off wisely. It means managing funds and paying attention to details. You can't do any of that with rough estimates -- pessimistic or optimistic -- about how much you owe, how much you make, how much you pay out and spend each month or how much interest you pay on your various debts.
To get out of the red, you have to know the real numbers so you can come up with a real plan of action and real solutions. So sit down, get out the balance statements and total it up. Chart how much cash you spend every month. Rank your debts by amount or interest rate or however it makes you feel more organized. But know your real numbers and keep them updated as you make progress.
- Stop spending & start paying (and saving). One big thing that needs to change if you want to get out of debt is the "money in/money out" ratio. Once you know the numbers you're dealing with, you'll need to break out the scissors and start cutting your spending. No one gets ahead by continuing to spend in a way that created the problem to begin with. Be tough on yourself; Avoid any non-essential purchase until your debt is cleared up. And spend some time figuring out why you spent so much to begin with. Sometimes, the answer is clear: There was a medical or family emergency and you needed extra cash or you got a loan to finance your college education. But sometimes, it's not so clear, like maybe you bought a lot of "stuff" to get you through a bad emotional time or you buy things you can't really afford to feel like you're keeping up with the Joneses. Well, unless the Joneses are paying your American Express bill for you, you need to stop doing that.
Once you stop spending, you need to start paying off those debts. Go for the high interest rate cards first, because these can be the greatest money pits. Taking a long time to pay off a credit card with a 19% interest rate will ultimately cost you less than taking the same time to pay off the same balance on a card with a 30% interest rate. Or, you can go another route and pay off a card with a small balance first just for the morale boost: one less bill to pay. But come up with a plan to start paying off those debts.
Have a place in that plan for paying bills on time to avoid late charges and the over-limit charges that often soon follow. Also make a point of paying even just a tiny bit more than the "minimum due" each month on your debts. Often, the minimum payment will keep you in a vicious cycle where you're basically paying off interest and not the principal.
You also need to start saving money; otherwise, once the first emergency comes up, you'll be right back to relying on other people's money (credit cards, loans, etc.) to get out of your problems. It may seem next to impossible to put anything away while also trying to eliminate your debt, but give it your best effort. Being out of debt is a good thing; staying out of debt is even better.
- Ask for help. Sometimes, you just can't get out of debt alone. You need to ask for help -- or a little ethical treatment -- from those whom you owe. Don't hesitate to call creditors and ask them to lower your rates (they often will) or waive fees. If you're burdened down by high interest rate credit cards, find other cards with better intro rates (read the fine print first, of course...). And if you really can't scrape the money together to keep yourself from getting more and more in the hole, maybe it's time to ask for some help from family or friends. Only you know who you would be comfortable asking for financial help and under what terms you'd be comfortable.
Lastly, don't forget that there are debt relief counselors out there who specialize in helping you get rid of your debt. These can be found by browsing online, asking friends, family or colleagues who have used such services, or by browsing in your yellow pages. Just be sure to check the credentials of the counselor you use. (See link below for ways to avoid being tricked into a bad counseling situation.)