Have you recently run out of money or gone bankrupt and are all of your credit cards maxed out? Are collection agencies calling you and ordering you to pay? If this is you, you are in between a rock and a hard place. You need a ‘debt-free’ plan for life.
If you are in a constant state of worry and are wondering what you can do to get out of this hole, here are 5 small steps to overcome your debt crisis.
1) Make a List of What You Own
Your assets are very important when you are trying to overcome debt. If you own a car, new furniture, a motorbike or exercise machines, you might be able to bring some of your debt down. While you may not want to let go of your assets, it will definitely reduce some of the stress and creditor calls you are experiencing. Desperate times call for desperate measures. Sell anything worthy.
2) Make a List of Who You Owe
Do you have overflowing utility bills? Did you miss 6 car payments? Did you rack up $5000 on your MasterCard? Do you owe your neighbor $30? Make a list of your debts and put the highest priority at the top. You don’t want to be sitting in the dark, cold and depressed because you haven’t paid your monthly utility bill. Develop a plan on which bills to pay off first. Preferably, the ones with the highest interest rates. Sometimes it helps to pick a small bill to start and pay it off quickly. That will eliminate one worry and get one creditor off your back. Remember a budget is not a dirty word, it is just a plan to determine where your money will go.
3) Time to Increase Your Hours
If you are in a state of personal debt crisis, you might have to consider working two jobs to make ends meet. While this may not be easy and can be stressful on the body, times are tough and you need to dig yourself out of the hole before interest and creditors pull you under even further.
4) Necessities First
Even if you sell some assets and bring in some extra income, you must pay for necessities before anything else. Pay for your food, shelter, water and clothing. But that doesn’t mean dinners out, 5 star hotels, Perrier and Armani Suits or Gucci handbags. Those are not necessities. You probably already have servicable clothes, if not look at Walmart or even Salvation Army or Good Will, they often have very good quality clothes (often even name brands) especially if you go to the branch in the nicer neighborhoods.
If you rent, you might consider finding a roommate or a cheaper apartment.
If you own your home can you rent out a room? Sell and get a cheaper one? Refinance your Mortgage for a longer term to reduce your monthly payments and put that money toward other debt? Look at all your options- think outside the box.
Is a big car loan your problem? Trade down for a smaller/cheaper one. These are hard choices but they need to be made.
Don’t waste money on non-essentials. That starbucks (or even McDonalds) coffee may seem like a small thing but small things add up. Don’t spend money on anything that isn’t absolutely necessary and cut expenses everywhere you can.
5) A New Start: Pay Your Way
Now that you have some sort of an action plan, start small. As soon as you receive any money and have covered your necessities, start making your payments right away. Don’t wait until the bill is due. If you are running a balance, every day costs you more interest. If you have an extra $10 send it to the credit card company, if you wait, you may spend it. And the longer you wait, it may just go to pay interest, but pay it early and it will go towards principal. Start small and work your way up. Attack each debt with a plan.
Believe it or not, most people who put their mind to it and drastically cut expenditures and boost their income find that they can develop a plan to get their debt under control (or even eliminated) in two or three years. Looking at it from the start that may seem like forever but once you get started and you have a plan and are working that plan, you will realize that it really isn’t that bad.
And before you know it you will have eliminated that stress and you will feel much better about life. As each debt gets smaller the interest payments go down as well, which allows you more money to pay down other debts. And as the ball gets rolling you can pay off more and more debts, faster and faster. It just takes self-discipline. No new purchases, no new debt, make do with what you have and conserve every penny and before long you will be able to see the light at the end of the tunnel.
See Also:
3 Easy Ways to Cut Expenses Quickly
Small Steps to Big Savings on Home Energy Prices
Go Pro as the Family’s Budget Manager
Financial Planning and Budgeting
How to Dine Out Without Breaking the Bank
10 Money Management Tips for Kids
Photo Credits: by Images_of_Money Wiping out Debt
