Debt doesn’t make excuses, and it’s not partial to specific age groups, ethnicities or sexes. Debt is the great equalizer, and at some point in our lives, most of us will experience at least some sort of debt crisis. While moderate issues with debt are becoming more and more normal, those with severe debt issues can often feel as if they’re on an island, isolated, and with nowhere to go for help. While this can be a crippling feeling, with smart planning and money management, few debt issues are so severe that there’s no coming back from them without the help of bankruptcy.
Here are a few simple tips for anyone that has ever been dealt with the stress and anxiety that come with mounting piles of bills, collection calls and seemingly no way out.
First of all, breathe and relax knowing that this too shall pass. Debt isn’t often a permanent problem, it just takes patience, discipline and a solid plan.
Create a Budget
Budgeting is an overlooked skill that isn’t often taught in school, yet all adults should know how to prepare a basic budget. There are a few rules of thumb when dealing with a budget, and one of those is to budget 30-percent or less of your total income to housing-related expenses such as your mortgage, utilities, and cable or satellite. Another is that you should be putting aside at least 10-percent of your take home pay into a savings account or into a 401k or similar investment account. Of course, these are just rules of thumb, and if you already have a mortgage that costs you 50-percent of your take home pay, this isn’t going to do you a ton of good, but you can certainly look for categories in which you can begin to save.
Eliminate Unnecessary Expenses
First you need to cut all non-essential items. Consider switching to a cheaper cell phone plan (or canceling it entirely), cancel cable, the lawn service, and all other items that fall into the “wants” but not “needs” category. Stop eating out, and instead start learning how to shop and prepare cheap and delicious meals at home. Make your coffee at home or in the office rather than stopping at Starbucks each morning for that $4 latte. In general, you’re just looking for ways in which you can save a few bucks here or there, which can often save you hundreds of dollars per month.
Consider Additional Ways to Earn
Now it’s time to start looking into ways in which you can pay down your debt faster. It’s not necessary to pay all of it off at once, but high interest credit cards, and the like are often costing you 15-percent or more in interest, so it’s imperative that we remove the high interest debt first. After cutting expenses, the next thing that most will look into is finding additional ways to earn, whether it be by asking for a raise, finding a second job, or just earning some spare cash with a side job that you work here and there. Extra money means quicker debt resolution.
Look Into Debt Relief or Consolidation
This should be a last resort, as there are far too many horror stories of companies that are very expensive, but don’t offer much that you can’t do yourself. Ask for referrals, check for internet reviews, and if you absolutely must take this step, ensure that the company you choose has a solid reputation and doesn’t make “too good to be true” promises. While there are many legitimate companies out there that can help, there are just as many that have rather dodgy reputations. Do your homework, and choose carefully. If you are able to find one, they can often remove interest payments, late fees, and even consolidate all of your bills into one monthly payment in order to get everyone paid back as quickly as possible.
And if all else fails…
Consult an Attorney
If you are carrying large amounts of debt or have a change in income that prohibits you from paying your debt, the last resort is often bankruptcy. Before filing, it’s worthwhile to spend some time learning about the different types of bankruptcy filings. After learning about chatper 7 bankruptcy, many people come to the conclusion that this offers the fastest relief and the fresh start they are looking for. Remember, if you must file for bankruptcy, it’s a process best left to a legal professional, so do your homework.
Debt can be a scary thing, and most of us know all to well the feelings of stress and anxiety that often go along with it. Taking care of your debt isn’t easy, but with careful planning, discipline and execution of your strategy, many thousands of people begin crawling out of the hole that they’ve created for themselves each year. You can be one of them. Good luck.