Getting Out of Debt
Being in a large amount of debt can sometimes feel hopeless. But that doesn’t have to be the case! While it’s demoralizing, stressful and upsetting to have to handle a great deal of debt, it’s important to remember that there are things you can do to improve your situation. If you’re sitting there stressed out and wondering “How do I get out of debt?” you will be relieved to know that, for most people, there are several options available to help you.
Tips for getting out of debt.
Know your Debt
Many people who are deeply in debt aren’t familiar with the all of the details of their debts. Some don’t know how much interest they pay, some aren’t sure how often they need to pay and some don’t know the overall total of how much they owe.
This is for a number of reasons. In some cases, people don’t know how much they owe because they’ve lost track. In other cases, they have so much debt that they can’t remember specifics. Some people may purposely avoid finding out details about their debt because it stresses them out too much. Whatever your reason, it’s time to make a change.
Start by saving the statements and “amount owing” papers that are sent to you. If you don’t have the papers from last month, make a conscious decision to start saving them from this point on. Once you have a complete month of all statements, you’ll want to write down all of the information in one place. Write down who you owe, what you owe the money for, how much you owe and the interest rate on the debt. You’ll also want to write down when you need to pay your bills (for example, if you need to pay your credit card bill each month on the 15ht, write this down or add a notification to your phone, so you don’t miss a payment).
Stop Increasing your Debt
Many people find it tough to pay down their debt because they keep adding to it every month. If you want to get out of debt, you’ll need to stop adding on new debt. To do this, you’ll need to make a budget and ensure that you’re only spending money that you actually have (i.e. money in cash) and that you’re not adding anything new onto your credit card or line of credit.
If you can’t make your budget balance (i.e. if you don’t have enough money coming in to afford all of your expenses) you’ll need to find places to make cuts, find a way to make more money, or both.
Set Goals and Make a Plan
Once you know how much you owe, who you owe it to and when it’s due, you’ll need to make a plan for how you’re going to pay down your debt and eventually get out of debt. Use your budget to figure out how much money you’ll have each month that you can use towards debt repayment. Then, calculate how long it will take you to repay your debt. There are various online calculators out there that can help you.
You may have to make choices regarding which debts you should pay first. There are several schools of thought on how you should prioritize debt repayment. One is to focus on those debts with the highest interest rates first and make the minimum payments on your other debts. Remember not to skip payments on any debts as this can severely hurt your credit rating and cost you a lot of money in interest.
You might need to cut your spending in order to afford to repay your debts. Take a look at your budget again and see where you can make cuts.
Help Getting out of Debt
For some people, creating a budget and a plan can help reduce debt and eventually pay it off. However, other people are in more debt than they can handle. No matter how much they cut their discretionary spending, they aren’t able to get enough money to repay their debts and still afford their essentials like food and rent or mortgage payments.
If you are in a situation where you need help handling debt, speaking with a licensed trustee in bankruptcy could be a good option for you. A trustee can review your financial situation and provide you with information on the options that could help you reduce or eliminate your debt and allow you to get out of debt. A trustee can also administer bankruptcy and proposal processes, if either of these options are how you would like to proceed. Most trustees offer the initial consultation at no cost.