We’ve all been there. Looking at the bills that just keep coming in and not having the funds or means to pay for them all. Financial stress is truly one of the most all-consuming kinds of stress that there is. And when you have a big pile of debt, digging out of debt can seem impossible.
It lingers in your mind like a fog, spilling over into other areas of your life, making it hard to concentrate on other things until you’ve been able to make a plan to get yourself out of the mess you’re in. It’s difficult to get yourself out of killer debt, but I promise that eventually you will be out of this tough spot! It’s been done by many and it can be done by you. So what can you do and how do you start?
Digging Out of Debt
It sounds a lot easier to say then to do, but “don’t panic”! This seems obvious, but it is a natural reaction! Our instinct is definitely to panic. Letting yourself spiral into a depressive thought cloud of “what ifs” and imagining you’re living in a cardboard box on the street is an easy way to get absolutely nothing done. But, and it’s a biggie here, it won’t help your situation at all. In fact, it will hinder your problem solving. So don’t panic.
Stop Accumulating Debt
Many people run up consumer debt on their high-interest credit cards and end up in a hole. If this is you, stop making it worse by switching to a cash diet so you don’t spend more than you earn.
Calculate your debt
This is where the math comes into the picture, but have no worry…it’s simple math and you can do it.
First, simply add up exactly how much you owe and at what interest rate (if applicable). What kind of a mess do you really face right now? Is it worse than you thought? Writing it all out will help you visualize your problems and plan out your next steps to take care of them. It doesn’t matter whether it’s an unexpected medical bill, a leave of absence, or a huge unexpected home expense, you can make a plan that will work.
Get a simple sheet of paper and use it to tally up exactly how much you owe on this bill. Add this amount up against your regular monthly budget. All bills, all expenses, and all income. How much of your income can you put towards this debt expense per month after you face the music of all of it? Face the music, not just moan and groan and make excuses as to the why’s and how’s.
Put yourself on a payment plan
Depending on what kind of expense you’re dealing with, or even if you’re just a few months behind on your bills, you may be able to sort out some kind of a payment plan, rather than paying the entire lump sum all at once. Talk to whomever you owe the money to and see if this is an option. You will be very surprised at the usual reaction.
People you owe money to that are not getting that money paid back are pretty willing to accept some kind of payment and payment plan rather than getting nothing. Makes sense, doesn’t it?
In most cases, they are willing to be lenient because it means they have a greater chance of actually getting any money back. Be honest about your situation and let them know your plans to pay them back, with monthly amounts and a timeline. Showing that you’ve put a lot of thought and planning into your payment plan will help instill confidence in them and gain their agreement!
Snowball or avalanche?
Once you’ve figured out how much you owe and how much you can pay towards your debt each month, you need to decide how to dig out of your debt. What I mean is that there are generally two different strategies to use: the debt snowball and the debt avalanche.
With the debt snowball, you make the minimum payments on all of your debts each month, and pay any remaining money towards the debt with the smallest total. This helps you pay off the smallest debt first, and helps to give you psychological momentum. Once the smallest debt is paid, you can then pay any remaining money each month to the second smallest debt. Continue like this until all your debts are paid.
With the debt avalanche, you make the minimum payments on all your debts each month, and pay any remaining money towards the debt with the highest interest rate. Mathematically, this is the better way to pay down your debt as you end up paying less overall interest. Once the highest interest debt is paid, you can then pay any remaining money each month to the second highest interest rate. Continue like this until all your debts are paid.
So which is better…the snowball or the avalanche? There is no one right answer. Whichever benefit appeals most to you—paying off whole debts sooner or paying less overall interest—should guide which method you choose.
Find creative ways to make extra money
Obviously, the sooner you are able to get out of any rough financial spot, the better. You have your payment plan, but chances are that you will be paying things down for a long while. You may not be able to do much about that, but there is one thing that you can do!
Look into some other ways to make a little bit of extra money. Any extra income you are able to bring in will go straight towards paying off your debts and thus free you sooner from it!
Think for just a moment. Do you have any skills that you could potentially monetize? Are you crafty? If you can knit, crochet, or sew, it’s possible that you could use these skills to make products to sell to niche communities. Look into selling items on Facebook marketplace, local online yard sales, and Etsy! Wherever people craft or come up with items to sell is an opportunity. You can even sell your old unused stored stuff that’s been in a drawer or closet for years and make a few dollars. Flea markets are perfect for that.
Odd jobs can earn you money too
Most people have something up their sleeve that they can produce in their free time without even really realizing it! If you’re not crafty, there are other skills you have that you could make a little extra money off of! If you’re good at writing, apply for freelance writing jobs online.
Or see if you can clean windows, mow lawns, or mend furniture. There is definitely something out there that you are capable of doing and monetizing for a short period of time to help you get digging out of debt.
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No one likes to ask for help, but sometimes you have to swallow your pride, and see if someone can help lighten your load. This doesn’t have to be financial help. If you need childcare in order to pick up a few extra shifts, reach out to family and neighbors to see if anyone can watch your kids.
You don’t have to go through this alone. Even just having some moral support from friends and loved ones can help you as you navigate. You will be very surprised how many people will be willing to help with at least ideas and maybe even opportunities to earn some extra cash if you include them in your journey.
Your journey may take a long time, and there will be bumps in the road, but keep at it and be sure to celebrate your progress. Eventually you’ll dig yourself out of debt and be able to live a debt-free life!