Learn How To Stop Drowning in Debt Yourself
Disclaimer: We are not qualified legal or tax professionals and are not giving advice. Always speak with a qualified professional before making any legal or financial decisions.
People fall into debt each day – it might just be a national epidemic. The problem with being in credit card debt is that once you’re in, you’re in! It’s very difficult to get out of debt because it can be a financial trap.
If you can’t keep up with your credit card payments, or miss a payment, your credit will take a nose dive right into the toilet.
Cash is king, but good credit is just as important! Most people do not have cash reserves for a big purchase and must depend on credit. This is where good credit can be a godsend. Let’s discuss the necessary steps to take to keep you from drowning in debt.
Figure Out Your Debt Situation On Your Own
Your first step in getting out of debt is to identify all your debt.
- Get a copy of your credit report from annualcreditreport.com. This gives you a list of all your creditors
- Figure out the current debt amount, interest rate, monthly payment, due date and any other important information
- Record all this so it is very clearly laid out
Once you have all the information you can make an informed decision. It might be depressing but it is important to know.
Most experts encourage you to pay off the highest interest debt first. Others suggest paying off the smallest debts first. Sometimes paying off the smallest debt makes you feel like you are making progress. It depends on your unique financial situation.
You may be able to refinance or renegotiate terms, interest rates, and other debts. Many people are drowning in student loan debt. Student loans are difficult to renegotiate, but refinancing can be done.
If you need help learning what your interest charge on purchases will be, try our finance charge calculator.
Start a budget
Next, find out where all your money is going. Write everything down. Include where your cash is going, where you use your credit card, and what you can eliminate.
This is the basis of your budget. Budgeting doesn’t have to be a chore, but it is the only way you are going to get out of debt.
Your budget should include necessary and discretionary expenses. Your budget should consider the following, although you may not have expenses in every category. Don’t forget annual expenses like car registration.
- Housing
- Mortgage/Rent
- Property Taxes
- Household Repairs
- HOA Dues
- Utilities
- Electricity
- Water
- Heating
- Garbage
- Phones
- Cable
- Internet
- Groceries
- Food
- Alcohol
- Toiletries
- Cleaning Supplies
- Personal Expenses
- Gym Memberships
- Hair Cuts/Salon Services
- Cosmetics
- Babysitter/Child care
- Child Support
- Alimony
- Subscriptions
- Transportation
- Fuel
- Tires
- Oil Changes
- Maintenance
- Parking Fees
- Repairs
- DMV Fees
- Vehicle Replacement
- Healthcare
- Primary Care
- Dental Care
- Specialty Care
- Medications
- Medical Devices
- Clothing
- Gifts
- Emergency Money
- Entertainment Money
- Household Supplies
- Insurance
- Health Insurance
- Homeowner’s Insurance/Renter’s Insurance
- Auto Insurance
- Life Insurance
- Disability Insurance
- Identity Theft Protection
- Longterm Care Insurance
Figure out how much you spend in each category. Be honest. If you eat out every day, include that! Now you have a good picture of where your money is going and how much/where you are spending it.
Your next step is to decide necessary and discretionary expenditures. You may have to give up eating out, drop a gym membership, or stop buying coffee for a while. It won’t be forever.
See if there are places you can cut down your necessary expenses. Could you get a less expensive car, move to a new place, or save money on other expenses?
Do What You Can Yourself
- Consider refinancing debt
- Call credit card companies, etc. and renegotiate your interest rates
- Drop or decrease expenses
- Consider consolidating debt through a home equity loan
- Use cash to avoid the temptation to whip out a credit card
- Wait 24 hours before purchasing a non-essential item
- Add another/better job if possible
Get Professional Help Paying Off Debt
A debt elimination agency may be able to help you set a budget, renegotiate interest rates, and teach you how to manage money more effectively.
Ask about
- Services offered – look for a range of services
- Free educational information
- Developing a plan for the future
- Fees/Contributions – get them in writing
- Contracts or Agreements
- State Licensing
- Counselor qualifications and how they are paid (commission, etc)
- Security of personal data
Getting into debt is easy. Paying off debt is what takes work and effort. Following these suggestions can definitely help you to stop drowning in debt.
*Disclaimer: Pacific Debt Relief explicitly states that it is not a credit repair organization, and its program does not aim to improve individuals' credit scores. The information provided here is intended solely for educational purposes, aiding consumers in making informed decisions regarding credit and debt matters. The content herein does not constitute legal or financial advice. Pacific Debt Relief strongly advises individuals to seek the counsel of qualified professionals before undertaking any legal or financial actions.
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