Drat it all, you’re nearly in more debt than you can comfortably handle. And while you know there are moves you can make to mitigate your situation, you’re too overwhelmed right now to know what to do. Don’t panic, because while dealing with debt may feel like the end of the world, there are solid steps you can take to help yourself. Keep reading.
1. List Your Debts
Look that debt monster square in the eyes. It’s imperative that you learn exactly what you’re dealing with. So, make a list of your creditors, along with account numbers, interest rates, and contact info.
2. Check Your Credit Report
Yes, you’ve been having a tough go of it lately, but it’s important to check your credit reports to see where you stand, and whether there are any errors. In fact, you can get a free copy of all three reports.
3. Establish a Budget
You may think creating a budget at this point is moot. In fact, the opposite is true: you need a budget now more than ever so you can see what’s how much is going out and where you can cut back. You might find ways to save money – that fancy morning latte? — that you can put toward your debts.
Establishing a budget is also important in terms of figuring out how much you can reasonably afford to pay your creditors.
4. Contact Your Creditors
Now that you understand what you’re dealing with, and what kind of payments you can make, it’s time to let your debtors know what’s going on. If you’ve already missed a payment here and there, they’re not totally in the dark, anyway. So, it’s best to get this out of the way.
Before you make those calls, though, check your creditors’ websites to see whether there are any allowances for hardship cases, particularly if they relate to the lingering pandemic.
See if you can get your rates reduced, or have your terms altered to give you more time. Be honest about how much you can afford, and don’t over promise about paying more in the future. It’s important to only make promises you can keep, or else risk finding yourself in an even worse situation.
Also, be certain to have the creditor send either a “snail mail” or electronic letter that confirms what was agreed upon.
5. Determine a Debt-Reduction Strategy
You can also work on lowering your debt load yourself. Two popular and effective methods are called snowball and avalanche:
- This entails paying off your smallest debt as quickly as possible, making minimum payments on other accounts, then attacking the next smallest debt until your obligations are cleared. This method works best for those who need early momentum to keep going.
- Avalanche. Here, you pay off the debt with the highest interest rate first, while making minimum payments on your other debts. Then tackle the account with the next-highest rate. Rinse and repeat until you’re done.
If you still need help, or your debt woes are more acute, we recommend you get debt help through Achieve.
6. Find More Earnings
In addition to finding ways to slash your spending to have more money to pay debts, you should also try to bring more cash in. Maybe there are things around the house – electronics, a classic bike, or a music collection, say –that you can sell to make money to pay down your debts.
Maybe you can also ask your employer for additional hours or find a part-time job. Perhaps there’s a hobby you can monetize or some gig work like a dog sitting or ride sharing that you can do for extra cash. If you have a particular skill, maybe you can do some freelancing.
No, dealing with debt is no joke. But if you have a plan, and follow some practical steps, you’ll ultimately find yourself in a better financial place.