It wasn’t so long ago that I was living paycheck to paycheck. In fact, worse, with my income I was struggling to just keep up with my minimum debt repayments each month. The slightest issue could (and sometimes did) derail the whole carefully managed situation.
Now, though, things are much different. I’m virtually debt-free and have disposable income to enjoy. So there *is* light at the end of the tunnel. But trust me – if you’re really drowning in debt right now then you’ve got a lot of work ahead of you to regain control of your finances and come out the other side.
Based on my own experiences of fighting – and winning – against a mountain of debt, here are the four most important steps you should be taking today to start making some significant changes to your situation.
And remember; the longer you ignore your debt problems, the worse they will get. No matter how painful, uncomfortable or embarrassing they may be, the sooner you get started on solving your problems the sooner you’ll get your finances back on track.
Stop Spending Money
It might sound like the most obvious step of all but if you’re drowning in debt then your first step should be to stop spending money if at all possible. See if you can go for a day without spending a penny. Then try a week.
Stop going out with your friends for a while, give up those posh coffees, live on the food in your cupboards or freezer rather than buying more. Because the sooner you can stop spending money, the more you’re going to have leftover debt repayments, and the sooner you’ll get back on your feet.
Review Your Outgoings
This step was arguably the most powerful for me. As someone who spends most of my money with my debit card – rather than using cash – I combed back through the last few months of bank statements, looking at exactly where I spent my money.
When you have your spending habits laid out in front of you in black and white, you’ll be surprised at how much you spend on certain things and where savings become obvious. Consider reducing your cell phone tariff, using price comparison sites to get a better utility supplier, cancel direct debits that you’re not using, and so on.
By calculating your savings as you go, not only will you be pleasantly surprised at all the “extra cash” you’ve found, but as this figure grows it’ll also help to motivate you into really making a dent in your debt situation.
Sell Your Junk
Everyone has unwanted stuff at home and selling it off on sites like eBay, Amazon, and Craigslist is one of the easiest ways to find a few hundred dollars out of thin air. Combined with the savings you’ve made on your spending, within a few weeks you should find yourself coming up with a small “nest egg” of money you didn’t even know you had – and that can come in very handy indeed.
Negotiate With Your Creditors
Are you struggling to keep up the payments on your debt? If so, it’s time to ring your creditors to see if they can help. This is without a doubt the most unpleasant part of the process – my heart was pounding the whole day I rang my creditors – but you’d be surprised just how useful it can be.
Simply ring them up, one at a time, and explain how you’re struggling to meet their demands. Let them know you *want* to pay it all off and do the right thing, but that you’re in a financial bind right now. Then ask if there’s anything they can do to help.
Not every creditor will be sensitive to your request, but quite a number will be able to offer a payment holiday, reduced or even halted interest payments, etc. A few might even be willing to accept a single lump sum to settle your debt that is smaller than the existing sum.
With your newly liberated cash, this is a definite possibility. And even if not, at least one or two of your creditors will likely give you some kind of preferential treatment simply for having the balls to ring them up and ask.
This should further help to ease your financial pressures, allowing you to think more clearly about the future and budget for your debt repayments without you losing too much sleep over the situation.
Make A Debt Repayment Plan
Lastly, once you’ve reduced your expenses, sold some old stuff, and seen what your creditors can do to help it’s time to go ahead and make a proper financial plan for your debt repayments.
Use your spending figures from earlier, the extra cash you now have, and any reduced rates, and go to town to hammer out a repayment plan that will not only meet all your creditor’s terms but also allow you to have some kind of life while paying them off.
Then put it on autopilot – ensuring that your debt repayments go out every time you’re paid automatically. Doing so means those bills that arrive in the post won’t worry you anymore. There’s nothing quite like getting bills – as I do – that reminds me I need to pay “zero” because the payments have already been taken care of!
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