After many years of fighting debt, poor credit, thoughts of bankruptcy and temptations to sell my firstborn, I have stumbled onto a successful formula for getting out of debt, and more importantly, staying there. I say “stumbled”, because I literally felt helpless and hopeless as I mucked around the financial world. Each bank or advisor I went to thought I should consolidate my debt in order to pay off my credit cards and loans faster. To me, this was going INTO debt to pay off debt. That just didn’t make sense.
So I struck out on my own (and drug my husband with me kicking and screaming) and today I can safely say I saw the light at the end of the tunnel and walked through it! Here are the tips I found to be the most practical, successful and easy to follow for a procrastinator like me.
Keep track for an entire month of what you are spending your money on. Every penny. Taking cash from an ATM doesn’t count as “cash” in the ledger, it must be accounted for in another category. It’ll likely fit in the “coffee”, “lunch” or “entertainment” folder. If you don’t have a category for something you spent money on, make it. This first step allows you to really see where your money goes. Pop!
Evaluate this list and find places you can cut costs. You must evaluate a NEED vs. WANT for each item. Don’t sacrifice all pleasure for the sake of a bill, but be reasonable. You likely don’t need to go out to eat four nights a week, but once a month is just fine. Take the saved money and apply it to the next step.
List your credit cards and loans in order of interest rate, highest to lowest. Pay only the minimum amount due on the lowest loans and extra on the higher ones.
Each night balance your check register. Using a debit card for all purchases, even the $2.76 gallon of milk, will allow you to better keep track of what you spend. In your check register, round up to the nearest dollar. At the end of the month, reconcile your bank statement with your check register. You’ll have more money in the bank you don’t have record of and that can immediately go to an extra payment.
If you find that you have more to pay out each month than you bring in on payday, a debt management firm can help. An internet search under “debt management” will bring up a list of reputable firms willing to help repair or maintain your credit while helping you get out of debt. These firms will not work with secured debt, but will aid with credit card bills and other unsecured loans. Arrangements are made through them with your creditors to lower your interest rate, eliminate late fees or over limit charges for a specific time period. This is contingent on regular payments being made. One monthly fee to your debt management agency is dispersed to each creditor per their agreement and your balances start to go down and down.
Most of all, don’t wallow in discouragement. It is easy to feel as though you are the only one in the world with financial woes. It’s like a scarlet “D” on your chest. You did not enter deep debt over night and it will not be an overnight fix to get out of it. But when you do, with your own hard work, the light at the end is really beautiful.