Charge into your debt like a bull
So your in debt, don’t worry it happens and is happening to millions of people right now. These are unprecedented and difficult times. Keep your head up, avoid any irrational actions and just keeping hacking away at the debt. Here are the top five things to do now to get you on the right track.
1. Know your exact situation
Sit down with a pen and paper and find out exactly how much debt and payment obligations you currently have. Find all your old contracts, bills, and statements so you are not guessing. Pick up the phone and call your credit card company and loan institutions. You will need a detailed account of your current liabilities and debts. Take your time, this should not be rushed. It is important to know where you currently stand. Then make a nice spreadsheet so you can track your progress. The confidence boost of knowing you are making headway and seeing real gains will get you through this process. The only way to have this is to first have an accurate account of your debt.
2. Make a plan – organize and prioritize your debt management
Now that you have the organized account of you debts, it’s time to get busy. Add another column to your spreadsheet called ‘interest rate’. Now go through and enter the current interest for every single debt you have. The idea is to pay down the highest interest rate debts first because these are the ones that are doing the most damage to you finances and killing your debt management plan. I personally am a big fan of small, reasonable consolidate loans. Take a 19% interest rate credit card and transfer it to a 9% rate credit card. Slowly slowly keep doing this over time and you will be amazed at the results. Trade the higher rates for lower rates and soon the average interest rate you are paying on your debt will be much smaller. So have a plan. Keeping organized, making and following a plan is a small price to pay and the result is huge.
3. Curb your spending – make a budget
It’s one thing to say that you need to spend less money, it’s another thing to actually achieve it. The key to success, is once again organization. Write everything you buy and how much you spend for each thing down on paper for one month. Yes I know, what a pain in the hoohoo! This will only be one month. You can do almost anything for one month. When the month is finished, take your valuable data and compile into a legible and readable document or spreadsheet. You will be amazed to see a fair amount of ‘fat’ that can be easily trimmed from you current spending. You can now create a budget. The key to long term success with a budget is the same as dieting; think long term. Don’t make your budget painful and impossible to follow or you will be setting yourself up for a rebound and possible loss of ground. Make you daily, weekly and monthly budget workable and enjoyable but sensible. Such small things like buying a coffee thermos and making your coffee at home will save on expensive trips to Starbucks. You get the idea.
4. Do not add more debt
This one seems obvious, but is a classic cause of further debt. You don’t really need a new car, or to buy a new house. Get your personal finances in order first before even considering new debt obligations. We are suckers for all the advertising and actually believe we need these objects to make us happy. Don’t buy it, more shackles and heavy weight of being under the prison of debt is not going to make anyone happy.
5. Debt collectors – be like a duck
When the debt collectors come knocking or calling, deal with them firmly and calmly. Let the stress and threats roll of you like water on a ducks back. If you pay them, make a deal to get a deletion from your credit report. Some creditors will agree to delete the account from your credit report if the request comes from a collection agency. This is a good example of how even when our backs are against the wall, there is still a little room for negotiating. Speaking of making deals, don’t be afraid to call the credit card companies and banks and ask for a lower rate. Making a phone call can save tons of money in long term interest fees.
