If there’s never been a blues song written about debt, there certainly should be. I can almost hear it banging around in my head – “Got them big debt blues. don’t know what I gonna do.” The fact is, if you’re heavily in debt this can keep you from buying a house, force you to pay more for your insurance, cause marital problems and even make for a more dismal future.
$2.3 trillion in non-real estate debt
If you want to hear a truly astounding statistic here it is. U.S. households currently owe an amazing 2.3 trillion in non-real estate debt. Many couples have been forced to do dangerous things such as borrowing from one credit card to cover monthly balances on others, while hoping against hope that this would give them some time to improve their situation. Unfortunately, it usually does not.
Tip# 1: Figure out what you owe
If you’re having a serious problem with debt, the first thing you need to do is determine exactly how much you owe. This may seem simplistic but the first step to getting out of a financial hole is to make a list of all your payments, debts, interest rates and terms – so you’ll know exactly where you stand.
Tip #2: Think about getting professional help
Many couples that have had problems with debt have gone to credit counseling agencies for help. If there is not one in your area, you can easily find one online. A counselor at one of these agencies will help you create a debt management plan and will negotiate with your creditors to get lower interest rates. If you decide to do this, be sure to choose a consumer credit counseling agency that’s a non-profit and a member of an NFCC.
Tip #3: Shred your credit cards
Again, this may seem simplistic but you need to get rid of all your credit cards and start paying cash or using debit cards for everything. The number one reason people get in trouble with credit card debt is because they lack self-control. Getting rid of your credit cards is a sort of “tough love” way to solve that problem as it forces self-discipline and eliminates those impulse purchases that might have gotten you in trouble in the first place.
Tip #4: Trim your spending
Track your spending for a month, This might really open your eyes. Spending $3.95 daily for a specialty coffee drink may not seem like much of a deal but actually totals nearly $100 a month. If you were to use that money to help pay down your debt, you could reduce it by about $1200 in just one year. You should also take a hard look at how often you eat out. You might be able to trim your expenses substantially just by forgoing those restaurant meals and fixing more meals at home instead.
Tip #5: Bring in more money
Put on your thinking cap and see if you can’t come up with some ways to make extra money. For example, you might be able take an overtime shift, get a part-time job, have a yard sale or sell other assets. Many families have been able to generate $200 or more simply by selling stuff on eBay.
Tip #6: The old carrot and stick
Most financial experts agree that it’s easier to stay on a budget if you reward yourself occasionally. Your budget is like a food diet. If you cut it too much, you’re likely to go off it. Treat yourself to a night out, save for a vacation or find some other way to reward yourself occasionally for staying on that debt diet.