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Struggles with Debt

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Consider these 5 Steps towards Relieving your Struggles with Debt

Step 1:  Acknowledge your Problem; this might be the most difficult step for anyone.  Many people harbour the false hope that something will happen to help them out or sometimes just hoping the problem will disappear.  Rather commit yourself to get out of debt and then stick to the commitment.

Step 2: Make a list of all the debt you have in order to determine how much it really is; this can be very scary because most people do not know how much they really owe.  On the list, you should write down to whom the money is owed, the minimum monthly payment, the balance of each debt as well as the interest rate you pay on each.

Step 3:  Make up a Budget and a list of ways to cut your expenses; find the leaks in your budget.  Where do you spend money that you do not need to be spending money?  Review all contracts; like your cell phone contract, Cable services, gardening services and refrain from taking expensive holidays and spending too much on entertainment.

Step 4:  Stop using debt, like credit cards; it will do no good if you keep on making more debt.  Continuing to use your credit cards will only worsen your debt load and will not do a thing to help in solving your problems.  Rather go on a strict spending diet and focus on paying off your debt.

Step 5:  Prioritize; put your debt in an order you will pay them off.  Target the more expensive debt with higher interest charges, like personal loans.  These will cost you more the longer it takes to pay off.  You can try to pay off more than the minimum payment to minimize interest charges.  Keep your car loan and home mortgage up to date.

Nobody wants to be in this position, but, life happens, and you cannot always come out on top or like a cat, land on your feet.  Unknowingly, you can prolong your financial setback if you continue to make decisions that are bad for your pocket.

Things you should not do when you are Broke and in Debt:

  1. Do not take out a loan for paying off debt; or a loan for a new car, or, for that matter, do not take out a loan for any reason. When you are broke you do not have money and you cannot afford to add another payment every month.
  2. Do not loan money to a friend or co-sign for a loan for someone; they are probably in the same dire straits as you. Co-signing means that you accept responsibility for the payments if the other party cannot make it.  You do not have money, to begin with, and should not promise any to somebody else.
  3. Do not treat yourself with an expensive vacation; using credit cards and money you do not have. You’re broke.  You cannot afford a vacation, expensive or not.  If you maybe have money saved up to go on vacation, you can rather use it for something that needs payment urgently.  Maybe an overdue bill, car repairs or saving it for that unplanned thing, that always seems to happen when you can least afford it.
  4. Do not eat at restaurants or buy fast food; it is a lot cheaper, and healthier, to buy groceries and prepare your own food at home. Pack your own lunch for work.
  5. Do not overdraft on your bank account; a negative bank balance will be charged overdraft fees, more money to pay towards debt when you already do not have any, to begin with. Try to keep your bank balance out of the red.
  6. Do not be late with your bill payments; again, fees will be added to late payments. And again, more money is added, to pay next month, money that you already did not have to pay this month.  If you should fall too far behind you can have services disconnected and you would have to pay the full balance and a reconnection fee before it can be restored.
  7. Do not quit your job; without being sure about a new one. Even then, it is better to stay with the sure thing you have, with the income you have every month.  You know where you’re at, at your current job, but won’t know what to really expect from a new job.
  8. Do not pretend to have money; people will expect you to spend money if they are under the impression that you do have money. You do not have to tell all to everybody, but it is better to just say you cannot spend too much at moment due to unforeseen matters.
  9. Do not pay to get your house cleaned, your car washed or the garden tended; this is all things that can be managed by yourself. Do not pay someone else for things that you can do yourself.
  10. Do not pay for subscription services; cable services, movies, magazines, health clubs, the gym, are usually things that you can stay without for at least the time being. Cancel all recurring expenses.  You will have to get used to living without, but it will help you save and pay off your debt, a little faster.
  11. Do not waste water and electricity; these two services can be controlled. You can turn off the lights in rooms that are not used.  Keep only the minimum appliances on during the day and switch off most during the night.  Do not let the water run.  Do the washing with cold water.  There are many ways to save on electricity and water by just using it wisely.
  12. Do not drive more than you have to; combine all your errands and drive only once to do everything. For example, do the grocery shopping when you go home from work.  You can save money on gas when you do not drive double shifts.  You can also use public transport, walk, ride a bicycle and carpool, to save money you would have to spend on gas.

There are still so much more do not’s and buy not’s, do not buy expensive gifts, or for that matter, any gift.  Do not frequent nail, hair and spa salons.  Do not buy new electronics.  Do not buy cigarettes daily.  Do not buy anything that is not an absolute necessity at this time.

When all is said and done, the debt paid off and you did survive, you can celebrate a little.  But, still, keep it small and simple.  The reward should not start you off in the wrong direction again.  Throughout the whole process, you should remember all the lessons learned, steps taken and the do not’s, and then use this to keep living debt free and financially strong and free.