I frequently get e-mails from readers asking for help with their finances. They are mired in debt of all kinds. They’ve suffered through the financial woes that come with astronomical medical expenses, crushing student loans, credit card overload, job loss, and bad business decisions. They’ve lost everything in a natural disaster, a fire, or a divorce. They’re broke and broken.
And my heart aches for each and every person. I remember what it feels like to have debt. I remember what it feels like to feel stuck. I remember the fear and anxiety. I wish I could cut a check to each and every reader and make it all better, but I can’t. The real journey to financial freedom is an individual journey. It is a road that must be traveled by the person who created it. All I can do is offer my advice as someone who’s been in debt and got out.
How To Get Out of Debt and Stay Out
When people ask, “How do I get out of debt?” or “How can I stay out of debt?” I am reminded of the lessons I learned on my financial journey.
Understand there is no quick fix.
It is very easy to get into debt and very hard to get out of debt. It’s like weight gain that way. It’s just as easy for bad spending habits or an unexpected emergency to send your finances into a tailspin as it is to gain 10 pounds after a couple of weeks of eating junk.
Getting out of debt will take work. In fact, it will take a lot of work. And it will suck. Think of getting out of debt like running a marathon. There are hours and hours of training and you will struggle and stumble along the way, but reaching that finish line is one of the most gratifying experiences you will ever have.
You’ve got to get real.
Now is the time to start asking yourself some tough questions.
You know you’re swimming in debt, but do you know exactly how much debt? Do you know your net worth? What income do you have? Do you have anything saved for an emergency or retirement?
What led you to your current financial situation? If your debt was caused by poor spending decisions, what emotions led you to make those decisions?
What things in your life could you do now to change your situation? Where could you find money to pay down this debt? What changes will you have to make?
You’ve got to be honest about your situation and you have to stop putting off doing something about it.
You’ve got to stop the bleeding.
You financial situation isn’t like some little cut on your finger you can slap a Band-Aid on and call it good. It’s a full-blown, blood-spurting emergency that needs to be addressed immediately. You will never feel secure in your future unless you take the steps to stop money from bleeding out of your life.
You must get a grip on your finances and you must start today. If your debt is from credit cards, you need to cut them up and stop using them. If late fees and fines are piling on top of what you already owe, you need to start talking to the people you owe money to about what you can do. You cannot continue to do what you’ve been doing and expect your situation to change.
Make a plan to deal with your debt.
There are many different approaches to paying off debt so pick the method that you think will work best. Figure out what your necessary expenses are each month and what income you have coming in. What will you need to do to find the extra money to pay down debt? Will you need to find a second job? Sell some stuff? Refinance? Will you need to negotiate payment plans? Make a written plan of what you need to do and refer to it often.
Depending on how much debt you have, you may want to find a reputable, non-profit credit counseling organization in your area to help you. They can provide you with information on things like debt consolidation, payment plans and bankruptcy options.
I highly recommend finding a method of budgeting that works for you. While it’s not free, I love the goal-setting features of You Need a Budget and it comes with access to all kinds of budgeting articles and videos that can help you. There are also all kinds of spreadsheets, apps, and software (some free, some not) that can help, so check out the ones that offer you a free trial to see how they work for you.
Establish an emergency fund.
It doesn’t take much to get yourself into financial trouble. A broken water heater, a flat tire, or a trip to the emergency room can be all that it takes to start a downward spiral. An emergency fund is like an insurance policy you can turn to whenever trouble pops up, so start working on that emergency fund even if you still have debt. You will need it.
Work on your money every day.
There are little things you can do each and every day that can help you save money. And that money can help you pay down debt and establish an emergency fund. There’s no “set and forget” when it comes to your money. Pay attention to how you spend money each day. How could you save more money? What mistakes did you make today that you want to avoid tomorrow? What did you try that really made a difference?
Spend a little time with your money each day – whether that’s implementing ways to save or following up on some unclaimed funds. The more you know and understand your money, the more successful you will be.
Surround yourself with supportive people.
Get your significant other on board with your plan. Connect with family and friends who want to get out of debt. You need cheerleaders to spur you on and devil’s advocates to question your impulse shopping. You need good people in your corner to encourage you when the going gets tough.
View life through a different lens.
The best way to change your financial situation is to change your attitude. The life you lived in debt is not the life you want for the future. This journey to paying down debt isn’t about toil and suffering and deprivation. It is about doing the work to make a better life for you and your family. See this new era as a challenge. Find joy in frugal, money saving activities. Let go of consumerism and learn to use it up, wear it out, make do, or do without. Learn how to have fun without spending money.
Never give up.
Getting out of debt is hard. There will be setbacks. There will be times you want to quit. Don’t give up. Keep working at it. The rewards are worth it.
Once you’re out of debt, make sure you never forget how bad debt feels and how good it feels to be free from it. Continue to apply all the lessons you learned as you paid off debt to build a stronger, more secure financial future.
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