Want to Get Out of Debt?
Face up, 'fess up and get out of debt.
There are a lot of people walking around with the debt monkey on their backs. A lot of people. And some of them can't understand how they got roped into carrying the little beastie around with them. All of them wish they could shake the bugger off. So, why don't they?
Answer seems easy enough, doesn't it? Just pay off the debt.
But wait. To do that, a body would have to admit to having debt and there are people who haven't yet 'fessed up to how much they owe. Some even pull out the wide eyes and Betty-Boop lips as they announce, "I don't know how much I owe."
Really? You don't know how much you owe? You're just lucky that you're not in the room with me, 'cos I'd give you a good smack!
I assume, because you're reading this, you're interested in getting the monkey off your back. To do that, you have to do exactly what I say…
- Start by gathering every last statement you have for your debt. You'll need your most recent statements to get a clear picture of what's going on. If you've dumped them all, just wait 'til your next statements arrive and collect them all in one place.
- On the Own Up to Your Debt Worksheet, list all the debt you have including:
• credit cards
• lines of credit
• loans (for your wedding, furniture, whatever)
• auto financing
• student loans
• buy-now-pay-later loans (even if they haven't come due yet)
• outstanding bills (utilities, phone bills, cell phone,)
• the tax man
• spousal / child support in arrears
• family loans
• loans from friends
• pay advance loans (from stores)
• pay advances from your employer
- Identify what you used the money for since you want to be able to remember what you're paying all that interest on. Hmmm, all those restaurant meals don't look like such a good investment now, do they?
- Put in your current balance from your last statement.
- Put in the interest rate charged.
- The worksheet will calculate approximately* what your payment will be if you decide to pay off your debt over one, two or three years and give you a monthly total.
(*Hey, I built this worksheet and it'll give you good guidance, but if you want a perfect amount, check the web for debt repayment calculators. The point of this exercise is for you to see your reality and come to terms with what you're going to do about it.)
- DO NOT plan to take longer than three years to pay off your debt. There's a phenomenon called "debt fatigue" that sets in if live with your debt for too long. Thirty-six months should be your MAXIMUM repayment timeframe.
- If re-payment looks impossible, here are some steps to take:
a. Get your interest rate down. $5,000 on a credit card charging 25% will cost you $521 a month to repay in one year. Get your interest down to 12% using a consolidation loan and you'll pay only $467 a month on that balance. Transfer your balance to your personal line of credit and pay just 6.5% and it'll only cost you $444 a month to pay off that $5,000 in one year. Better yet, transfer your balance to a credit card with an introductory interest rate of just 2.5% and it'll cost you $427 a month. There, you just saved $100.
b. Find a way to trim your budget so you can put more money towards your debt repayment. Use Gail's Interactive Budget Worksheet to create a budget that will let you increase your debt repayment amount. Com'on now, you can trim another ten percent. You can do it! I know you can.
c. Make more money. Yes, you may have to find a second job until you've made a dent in your debt. It'll be worth it to get the monkey off your back, I promise.
- This is the hardest part: Tell someone what your plan is. Better still tell two, five, eleven people. If you go public, the pressure will be on to stick with the plan.
- For reinforcement, find (or borrow, but don't buy) a backpack and fill it with the stuff you have charged but have not yet paid for: CDs, books, those snappy shoes, that new cell phone. The idea is to make the backpack HEAVY. For the first week, and every time you're feeling weak and want to go shopping, hoist that sucker on to your back and take it with you. Sound hokey? Carry that monkey around for a few weeks and you'll see how motivated you are to get that debt off your back.
Congratulations! You're making progress. I'm proud of you. Stick with it and before you know it you'll be debt free and light of step.