I wish to put this question out there for people to think. I don’t want you to comment back saying, “that’s me”, or “I have that problem”. How many of you are overwhelmed by a mountain of debt? If your answer to that is “I am”, you are not alone. Millions of Americans are burdened with seemingly uncontrollable amounts of debt. It’s no reason to be embarrassed.
Credit counseling programs will tell you they can teach you things credit card companies don’t want you to know, yet it’s the credit card companies who pay for this service. Debt consolidation programs offer you a way to turn a lot of debt into one bill with “low” monthly payments. What they fail to mention is that when you finally do pay it off, you will have paid double the amount you owed in the first place.
The first thing you need to do is stop creating unnecessary debt. This type of debt is almost self-perpetuating. Let’s just say, that John Doe is in debt because of medical bills. This is understandable, but he gets depressed about it. Instead of paying his bills he runs out to buy a computer to help fight the depression, he puts it on his credit card. He convinces himself that he “needs” the computer to help him get organized, and pay his bills. Of course, he had to get the software, and while he was at it, he threw in a game program for entertainment.
When he gets the bill, he adds to his depression, which means he has to go out and buy something else to ease the pain. This is how the circle begins to get out of control, and is what I mean by unnecessary debt.
My wife and I got rid of our credit cards early in our marriage, and it has helped immensely. The point of all of this is to stop the forward motion of debt. Don’t get me wrong, credit cards aren’t bad, but some people handle them well, and others just get into more trouble. If you’re one of the “others”, get rid of them before they control you.
The next thing you need to do is make a plan to chip away at it until it’s under control, and then maintain it. I know this sound too easy, but the fact is the hardest part is starting. Start with the small easy debts, and work your way up. In the end, you will end up with one or two big bills, instead of 20 little ones. This may frustrate some companies, and they may even send you some letters, but keep in mind, that in the end they just want to be paid, and will be happy when you do pay them.
One of the biggest mistakes some people make is to try and pay their debt all at once, leaving themselves without food, or electricity, or even a place to live. Only pay what you can afford. Don’t take away from your living expenses. It doesn’t help to pay your debt quickly if you’re starving.
One final thing you need to do. After each debt is paid, reward yourself with something little like a dinner, or something that you’ve always wanted and can afford to pay cash for (there’s no reason to make more debt). When you pay that last bill, do something big, like a vacation you’ve always wanted. Rewards like that feel so much better without the sting of debt.
Challenge: Go through your bills and put them in order from easiest to hardest to pay off. Start paying what you can afford. Don’t forget the reward.