What to Do When You Wake up to Find Yourself Deep in Debt
One of the things many people dread about January is getting those holiday credit card bills. The celebratory spirit of the holiday season often gives us that “que’ sera, sera” feeling, doesn’t it? That is, until January comes and we realize we’ve spent much more than we should’ve. The holiday debts, along with all of the debts that existed before the holiday season, start to overwhelm us, and then panic sets in as we realize we’re headed toward some rough financial waters. Now, instead of celebrating, you’re wondering how to get out of debt.
So, what do you do when you “wake up” one morning and realize that your debt load is too heavy to carry? Well, having had our “wake up” moment just over a year ago, and making the decision at the point to get out of debt for good, I’ve got some thoughts to share that might help:
1. Don’t panic. Seriously: calm down. Panic, at this point, is only going to make the situation worse. So, your first job is to accept your financial situation for what it is, and not chastise yourself for things you cannot go back and do over.
2. Assess. Write it down, on a sheet of paper, white board, or whatever: Each debtor, how much you owe them, what the minimum payment is and what the interest rate is. This will allow you to view the situation as it stands and face the facts about the seriousness of the numbers.
3. Reflect. After you assess, more fear and panic may set in. Instead of allowing it to take root, have a calm conversation with yourself or your spouse about a)how you are feeling (no anger or blaming here, please), b) what you want your financial life to look like (this is called sharing dreams), and c) which areas of spending are most damaging to your financial picture.
4. Plan. This is where you make your ” how to get out of debt ” plan. Now’s the time to write down your fixed and variable expenses and set a budget. This may feel decidedly “un-fun” and “grown-up” to you, but it is crucial if you want to reach financial freedom. Now’s the time, too, after you’ve written expenses down, to see what’s headed for the chopping block, and to set a limit on variable expenses such as entertainment, restaurant, and clothing funds. At this step you’ll make decisions like “Is it time for cable to go?” and “How can I reduce my cell phone expenses.”
5. Persist. This is the most difficult, and the most crucial part of changing your financial life. Any – any -path to financial freedom will hit roadblocks and bumps along the way, and when those bumps come, it’s up to you to decide to not let them defeat you. If you blow your entertainment budget one month, forgive yourself, move on, and commit to doing better the next month. Without forgiveness and persistence, your chances of success here are next to none.
6. Ask. Your debt situation might be so big that you just can’t conquer it alone. If this is the case, don’t be afraid or ashamed to contact a debt relief company or a bankruptcy lawyer if necessary. Or, enlist the help of a trusted family member or friend who is responsible with money.
Which reminds me: What do you do if your spouse is not on board with your “get out of debt” plan? Well, you’ve got a few options:
1. Share your financial fears and dreams with them. Tell them why the debt scares you, and how much you’d really like to be able to ____________ in a few years.
2. Ask them what their financial dreams are, and why they’re against getting out of debt. Maybe your spouse is afraid that he/she will no longer have spending money to do fun things. This is a fear that’s easily solved by allotting into your budget an entertainment allowance for each of you. Whatever their reason for not wanting to work on a plan to debt free, you can likely resolve it by making a plan to counter those fears.
3. Are they still not on board? Ask for a compromise, and then choose to do whatever you can to get out of debt. Maybe your compromise is that your spending spouse keeps his/her one credit card in their name, but the others all get closed and cut up. See if you can find a common ground for monies that will go toward debt, while still giving them some freedom in their spending. Also, work together to find out what it is that scares your spouse so much about working a how to get out of debt plan. Maybe there are some serious fears from their earlier life that are hampering their view of money. Find what works for the both of you, and then commit to doing what you can, regardless of their choices. And get yourself a good savings account too. No, it’s not acceptable for your spouse to be able to spend freely as they always have while you work and slave to get things in order, but either way, you’re still helping yourself, and that’s important.
Having started 2013 in a seriously dangerous debt situation, and having just made it through year one of our ” how to get out of debt ” plan, I can tell you that the above tips really do work, and that, in spite of the bumps in the road, it feels absolutely wonderful to be on the road to debt free. Won’t you join us?
Readers, what are your best tips for those deep in debt? Or, do you have additional questions about how to get out of debt?