When you sit down with your budget and try to wrangle it into a sensible plan for success, do you start to feel like it would be easier to run away? You aren’t alone! This is the reality for millions of people right now.
If you’ve been struggling with finances and the bills just keep piling up, it can feel like there is no way out. In fact, that’s exactly why people sometimes ignore their debts and hope they’ll go away (hint: they won’t).
Now, here’s a little bit of good news: getting out of debt isn’t impossible, even if you have monster debt burdens and creditors banging on the front door. Just follow our simple plan for eliminating debt.
Try the Snowball Method of Debt Reduction
Are you trying to pay off a big credit card and just can’t seem to get ahead? Are you about to fall behind on bigger accounts or thinking of not paying them at all? If the high payments are overwhelming, consider the snowball method by Dave Ramsey.
First you have to be current on all bills and have an emergency fund saved up, suggests Dave. This is step one, even if it takes you a few months to achieve.
Next, work on paying the smallest debt off first; it will give you a sense of accomplishment and the momentum to chase down those larger bills. Keep going until all your debt is paid off and you’re actively putting money into savings.
Stop Ignoring Demand Letters
There is nothing more stressful or depressing than when you open up the mailbox to find a disgruntled letter from a creditor demanding payment. If you’ve missed a payment or are a few days late, they will call you – and call, and call, and call.
Don’t ignore these calls and letters. The hard truth is that you do owe them an explanation, and even if that explanation is “I’m in a bad place and can’t pay,” reaching out will look better on you than if you avoid them. Explain your situation and in most cases they will work with you on an extension.
Overwhelmed with multiple creditors? Check into debt consolidation and talk to a pro about what repayment options are available.
Don’t Accumulate More Debt
The cycle of debt often includes obtaining new debt to pay the minimum payments on existing cards. This makes it impossible to get ahead and your credit score and buying power can be significantly damaged. People get in so deep just their interest payments end up exceeding what they can reasonably afford. Suddenly, the whole system goes up in flames and that can be disastrous.
It’s important to avoid bankruptcy at all costs. If you find yourself in this situation, talk to a credit counselor immediately. They can help you find ways to move forward without locking yourself into having to start all over again.
If you consolidate your debt, be sure the repayment terms are good and you can pay it back on time. Avoid getting new credit cards and extending or maxing out existing credit lines. Now is your time to use credit right.
Rework Your Monthly Budget
Things are not going to magically get better doing the same thing you’re doing right now. Change has to be made if you want to move forward (sorry, we know, that’s not always easy…but there’s no magic fix).
Start with taking a hard look at your budget. Aside from core household bills and basic needs, are there other places where you aren’t using money wisely? Pay close attention to the cash you spend going out to eat, entertaining yourself, and going on shopping trips. This needs to come to a halt at least until debt is better managed.
Thinking of taking on a side gig or second job? Great. Don’t use those funds for splurging, use them to directly pay off debt. It may be a hard adjustment, but just think of the advantages — a good credit score and not owing anyone a dime!
The stress from mounting debt can take the fun out of life and make it super stressful. Setting reasonable goals to pay it off can bring about a sense of peace and happiness. Using multiple ways to pay down what you owe can be attainable and help you regain your financial health.