Almost every day, I get a very sad tale of woe. It comes from someone who is carrying a debt load that seems to be beyond what they can handle. They list out their litany of debts to me and ask me how they can make it, believing that I can wave a magic wand and make it better – after all, I got out of some pretty desperate debt.
Most of the problems that these people face are solvable if they’re willing to put their nose to the grindstone and work on it, but the chunk of debt is often so large that they can’t see this and it sinks them further into a state of sadness.
Does this sound like you? Do you have a debt load that seems too large for you to handle and you wake up every day depressed about it? Here are seven things that you should do immediately to get this ship turned around.
Do something. Don’t sit around and wonder if you should follow Plan A, Plan B, or Plan C while you keep slipping further into debt. Most of the time, you’re focusing on what amounts to a trivial difference – a few hundred dollars over a very long period. Most people accrue much more than that in interest in a month on their debts. Pick a plan and get started with it – the only criteria you should worry about is understanding the plan in detail.
Talk to someone. Confide in a family member. Confide in an old friend. Some people even choose to confide in me. The point is to find someone that can provide some emotional support to your right now. Your immediate future is going to be filled with some hard choices – it always helps to have someone to talk to about it.
Get the full story. Get out every single debt you have and make a list of them. Find out the exact interest rate on each individual debt, how much you owe, and how much the minimum payment currently is. No matter what debt elimination philosophy you follow, this is an essential first step.
Find options for reducing each debt. Again, before you decide on a debt repayment plan, try to lower the interest rate on all outstanding debts. For credit cards, call the number on the back of the card, ask to speak to a supervisor, and request a rate reduction. For installment plan loans and student loans, research online and find out if there’s a rate reduction if you automatically pay the debt by direct deposit – or any similar reduction.
Get rid of some small assets. Got any DVDs you don’t watch? Sell them. Got some savings bonds in the closet? Sell them. Old video game consoles? Sell them. Valuable collectibles? Sell them. Any item that you have in your home that has value but doesn’t contribute in any significant way to your daily life should go. Don’t spend a bunch of time maximizing every cent out of the DVDs or video games, either – the hassle of eBay is usually not worth the small fraction more that you can get there. Then, take this lump sum of cash and use it to start the debt repayment process, whichever way you decide to go. Having that cash in hand to make the first dent into the debt monster is huge – and this is a great way to do it.
Hide your credit cards. Put them in a box up in the closet, out of sight, out of mind. Leave them there for a while. Learn to live without them. If you can’t afford something without the plastic, then you can’t afford it, period.
Dip your toes into frugality. I found frugality to really be empowering when first recovering from debt. Try eating a lot of simple meals at home, even if you don’t know how to cook well. The realization that you just had a simple supper that cost you about $0.60 versus a $10 take-out meal is usually an epiphany, and when you start doing it, you want to keep doing it. Put a moratorium on buying new clothes. Avoid places where you’re tempted to spend money. Look at all of your monthly bills and trim or eliminate some of them. If you’re already doing this stuff, check out The Complete Tightwad Gazette at the library and start reading up.
No matter what your debt situation is, there are immediate actions you can take that make you feel like you’re making progress – or at least alleviate some of the pressure of the situation. The real key, above everything else, is to take some action now, not later – right now is the best time to get started.