How to manage your debt
If you’ve made it as far as reading this article, you’re leaps and bounds ahead of many people already! In today’s economy people are living the lifestyle of defeatists… they’ve thrown their hands up in the air and left it to fate and god to pull them out of the mess of minus signs and red marks that is debt.
Well I have some bad news… God is too busy to pay your Visa bill. He has planets to create. As cliche’ as this sounds, however, the first step in figuring out how to manage your debt is: acceptance. Accept the fact that you have debt… accept that it’s there because of nobody else but you… and accept that the only way to get out of it is to look it square in the eyes and face it.
This is how how to manage your debt…
The Ostrich Syndrome
Poor Ostriches… When an Ostrich gets scared or is faced with danger it buries it’s head into the sand. The reason for this is that it believes that if it can’t see the danger it must not be present. Of course, this is certainly not the case and has resulted in quite a number of headless birds.
The same can be said for many people out there (albeit…I would hope not literally). It’s a very common pattern for people of all ages and sizes to bury their heads in the dirt when faced with too much pressure from bills and creditors. This derives from passing your control from yourself onto the collection services, banks, and billing agencies. Stand your ground, and remain in control of the situation!
If you’re not going to be able to make a payment on time you should be able to tell far in advance. Remain in control of the situation and call the agency in question to advise them of the situation. Tell them when you will pay them instead, and how much. Don’t avoid the problem and stay in control. Even if you have faulted already and you’ve started to receive phone calls from the company, pick up the phone. Avoidance leads to misunderstandings (and eventually collection agencies) and more often than not, the person on the other end of the phone will understand that life happens. Simply touching base with the billing department may save you late payment fees or allow you to defer to a later date.
Before you can manage your debt you have to prioritize your debt
So now that you’ve reached the point where you know exactly how much you owe, where you owe it, and you’ve faced the fact that you need to deal with it… the next step is to organize and prioritize your debt load. Pretend you’ve got a line-up of people all with their hands out… you’re not just going to take out your wallet and throw into the centre of them and hope it works itself out are you? No, you need to sit them down and ask some questions. How much interest is each one charging you? What is your outstanding balance with each? Which of these are affecting your credit?
The order in which you start paying your debts -as well as the greatest amount- should always start with the companies that are charging you the highest interest rate. The more you’re paying these bills the more of your money is going on principal which will make them reach zero alot faster. Set the rest of your bills on minimum payment and use any extra cash you can muster to knock down the high-interest bullies.
After you’ve obliterated the high-interest bills or if all of your debt has a comparable rate, focus on the debt that is affecting your credit the most and the ones you can eliminate the easiest and fastest. If you can get away with keeping the large bills on standby (or minimum payment plans) in favour of knocking off a couple of the two and three hundred dollar bills, go for it! Debt is alot easier to manage when it’s all in one place and the least amount of companies showing negative numbers attached to your name the better!
No get-out-of-debt strategy will be of any use to you unless you deal with the source first.
I can picture you now…. asking with a ‘little ol’ me’ face “Well whatever could be the source of my debt?” Well… you are, Sparky. Yup little ol’ you.
Whatever your story, it all traces back to the fact that you’ve mismanaged your finances. Perhaps you’ve thrown one (or twenty) too many big-ticket items on store credit? Perhaps you’re daily spending is out of control? (a coffee a day keeps the financial freedom away) Or maybe you’ve made some bad investments. Regardless, you’ve got here yourself; you need to get out of it yourself.
Now is the time to think about creating a budget that is feasible for your life style. It may very well be the case that you’re living beyond your means. How much are you spending eating out every day? Luxuries are not justifiable when you’re in debt.. what are you spending on clothes, travel, movies and games while at the same time scratching your head about why you can’t afford to do it more? Cutting down on all of these controllable life style habits will increase your money flow, which you can in turn use to pay down your debt load.
Debt is a horrible monster to have to face. It can put everything else that is important to you in life on hold until it’s gone. Just remember during this time that no dragon cannot be slayed but you first have to draw your sword, look it in the eye, and say bring it on! Once you make that first step (and with a little bit of juggling) kick back and let time do the rest for you.