Want to Get Out Of Debt?: 6 Steps to Get Started
Getting out of debt is a matter of turning one big, insurmountable problem into a several easily manageable ones. Serious debt problems will invariably need to be solved with a strategic plan. To get out of debt also means you will have to make some changes in your lifestyle, which can be uncomfortable for many people who aren’t prepared for it.
Here’s how you can get started:
1.) Identify all your debts
One problem we see a lot of debtors do is to address their loans in a partial and haphazard manner. Collect all your recent billing statements for your credit cards and loans and lay them out. Track down all the information you have on your auto loans, mortgages, medical debts, student loans, child support, and everything else that you could think of. You can then check your credit reports from any of a number of secured sites online.
After you have made a list of all your debts you can contact a debt negotiator. A debt negotiator specializes in debt counseling and connecting with creditors to make the best settlement for their client. Government bodies at the state and federal level may also be available to help advise you on your debt.
2.) See if you can get a lower rate
Call each of your creditors on your list to see if you can get a lower rate on your debt. While they may not always give you a rate, it’s not in the vast majority of creditors interests to keep a debt hanging over someone who has no ability to pay. Even if you don’t manage to lower your rates right away, you may get leads on how you could start doing so in the future.
3.) Figure out your goals
Regardless of whether you were able to lower your rates, a much clearer picture of your debt payment goals should now be available to you. You can now lump all your debts together and divide them by the number of months you think you will need to pay off your loan, taking into account all monthly fees and expenses. You should now have a clear goal of how much you need to start paying off your debts.
Your goals should be realistic. You don’t want your payment plans to be too aggressive, as you might find yourself short of funds in an emergency or everyday life. You may also feel too deprived and fall off the wagon and be in debt again. Neither do you want your payment period to be too long, as staying in debt can rob you of financial independence during that whole period. A period of 2-5 years is normal for most payment plans.
4.) Create a plan based on those goals
Now that you have realistic goals, you can start allocating time and resources towards meeting them. How you do this will depend on the proportion of your planned total monthly debt payments compared to your income. This isn’t always doable, so you may have to consider contacting a debt expert for advice. If the monthly payments seem easy enough to pay, be sure to target debts strategically, based on how soon you want them paid off.
You can also explore options to make your present situation more sustainable. This can involve finding a new job or additional source of income that allows you to meet those payments and attempt a gradual behavioral change that allows you to better manage the resources you do have.
5.) Track your progress
Make sure to keep tabs on how well you’re doing. Give yourself permission to celebrate milestones, don’t beat yourself up over small mistakes, and find ways to keep yourself motivated. If you’re at this stage you should be doing just fine. Just make sure you’re doing as well as you can realistically manage.
6.) Revise your plan as needed
Your financial condition today may not necessarily be the same or comparable with how it will be in a few months’ time. Every quarter or so, reevaluate if there are any issues with your payment plans, and revise them if needed. If there have been emergencies in recent months or if you’re not meeting your goals consistently, this should be a reason to rethink your plans based on your new situation. If you’re still having difficulty with your finances, be sure to consult with a debt expert to give you insights on how to get out of debt.