How to Get Out of Debt and Stay Out of Debt
Upon reading the headline, you may think this is a quick fix article to solve all your financial problems. Unfortunately, there is no quick fix, unless you are lucky enough to win the lottery. The fact is, many people are trying to support themselves and their families while being in unmanageable debt with low incomes. Once a person starts on the downward slide of having expenses exceed income even temporarily, such as during maternity leave, it can turn into a slippery slope and fast ride leading to bills overlapping months, bill collectors calling, things starting to get shut off, and worst of all, you could lose your home, aparement or car. This is a difficult place to be. How did it happen? Where are you on this scale? Hopefully your car has not been repossesed and you haven’t lost your home. You can prevent this from happening.
These days credit is very accessible. It is too accessible. It used to be that people could only spend the money they had. Now, people spend money they don’t have on a regular basis. “Spend now, pay later.” has become a way of life and part of the American culture. This is the very attitude however that gets most people into a financial mess. What is needed is a return to the old conservative values about money: Work hard, save, be frugal, and spend smart.
The first thing a person needs to do if they find themselves in a situation is to assess their situation to gain a full and clear understand of their financial reality. This means looking at all of your bills, and keeping them in one place. Have a special place just for bills. It can be a basket, a draw, a box, or something else you have in your home. You will always know right where to go if you have a question about what you owe. You will also need to keep track of your money in a money management register. Every time you allocate money to certain bills, or purchases, record it so you will always know how much you actually have available to you, whether the withdrawal has gone through or not. This heightened awareness will help keep you constantly informed and prevent you from bouncing a check or being charged overdraft fees. The last thing you ever want to do is go negative in your account. Always make creditors wait if they have to and never go negative. You can’t pay with money you don’t have, and if you do, you’ll end up paying more and have less for bills in the long run due to trying to get out of the negative.
The next step is to cut back on as many expenses as you possibly can. This may mean getting rid of the cable tv for a while, or starting to do more cooking rather than buying lunch at work everyday. Here is a good example: If you goto Dunkin Donuts for a large coffee every morning before work, that probably costs about $3 a cup. 3 x 5 is $15 a week. 15 x 52 is $780 a year. Turns a good chunk of change right there that can most likely go to pay a bil off. How many things can you give up to help pull yourself out of the hole? These changes do not have to permanent. They are temporary sacrfices that need to be made in order to get back to a healthy, stress-free, financial life. They will be worth it in the end and you will feel good about yourself knowing you are doing everything in your power to improve your situation.
Third, communicate with your creditors and let them know when you are able to make payments and for how much. Let your creditors know you are concerned and do in fact want to pay them off. Offer to send less than the minimum payment as a show of good faith that you want to pay but simply can’t at this moment in time. Never let yourself go negative in the bank whether you have overdraft protection or not. If the electricity has to be shut off for a short time until you can pay it, live with the inconvenience. That’s all it is is an inconvenience. The things that take priority are paying the rent or mortgage, car insurance, and car paymenets. Often times creditors will be willing to work with you if they see you are not ignoring them.
Fourthly, try to find a way to increase your income. This usually means putting in some overtime at work, or getting a second job. Yes, this is hard work to put in more than 40 hours. If you can put in 60 hours, then that’s great! The more income you make, and the less expenses you have, the faster you’re going to pull yourself up! The sooner you’ll have control again and be able to get ahead!
Your own personal situation will determine how long you have to stay closely on top of your budget, work hard, and make these sacrifices. Eventually, you will catch up on those bills that are a month or two behind. You will stop the slippery slope downwards in its tracks before it becomes too big for you to handle using these measures mentioned here alone. You will be able to catch up without the use of a credit card, and without increasing your debt. Instead you will also begin the slow climb out of debt.
Once you have caught up on all those old bills, and have brought yourself to level ground, now is the time to start making strides to get ahead. You can relax a little bit more now. You will probably be able to budget in some monthly entertainment.
One good goal to have to get ahead and prevent falling behind again is building your checking account to have an invisibile buffer of $500-$1000. This is money in your account that you do not record in the checking account register. It won’t be a big deal if you go negative, and since you’ll be going negative, and not counting you’re buffer, you will automatically replenish your buffer with your next deposit without the bank overdraft fees.
Maintaining a budget, excersizing self-discipline, and spending money you have rather than spending money you don’t have will keep you in a healthy financial state. This is not a quick fix, but a positive lifestyle change that celebrates the human spirit to help oneself through hard work and effort. You will feel proud of all you have accomplished once you reach your ultimate goal. Don’t let yourself be a slave to unneeded debt and backed up bills.
