Money – the money I don’t have, the money I wish I had, and of course, money I owe. Money is central to our lives and determines our standard of living, and has the ability to impact not only today but our future as well. What if you find yourself in debt, what can you do?
The road to debt freedom isn’t simple. It does take work to get out of debt, but as we all know the best things in life are never easy (or free…). Just because it is a long journey doesn’t mean your road to debt freedom has to be paved with stress.
Check out my five steps to get out of debt and get free from financial stress.
Step One: Have a plan
When it comes to managing your money and paying your debts the adage holds true. As a professional in the insolvency industry, I am continually startled by individuals who are unaware of who they owe, how much they owe, and their interest rates.
The first stage of any debt reduction strategy is to know your financial position, which is essentially your income vs your expenses, and you assets versus your liabilities. This simple exercise will let you know how much money you have to make those repayments.
Next step, know your minimum payments on every debt. Yes, meeting your minimum repayments keeps the debt collectors off your back, and your credit file intact. This tactic however, will not lead to debt freedom, in fact the opposite as you could be accumulating and paying thousands more in interest. Money you don’t need to part with! Think of the forfeited holidays and other freedoms money could give you.
For those who can’t meet their minimum repayments, act now! Either engage a professional to help you, or try contacting your creditors to reduce your repayments. The more upfront you are with your situation generally the better deal a professional debt negotiator can get for you.
Having a get out of debt plan will let you feel more in control and get you from being passive about your finances to being an active player.
Step Two: From Plan to Action
Having a plan is awesome, but as any yo-yo dieter can testify to, execution is the deciding factor on whether you are successful. Money management or debt reduction, means continually meeting your obligations monthly.
If you are committed to reducing your expenses to increase your repayments – do it! If you need to increase your income, apply for that job, or take that second job! There is no shame in that.
If you have to seek advice and have the conversation where you feel vulnerable and exposed! Then maybe it is time to take a deep breath and make that move. With every positive action, you build momentum and the confidence you can achieve your goals.
Step Three: Celebrate Progress
“It’s not about the destination, it’s about the journey”
We all know the hardest thing about being on a diet is you restrict yourself. But, this is the wrong mindset to have for both dieting and money!
Celebrate your victories, it is okay to reward yourself when you reach that goal! It will keep you motivated. Re-assess your financial position quarterly or yearly and see the strides you have made.
It is important to remember with every payment above the minimum you get closer to your goal of eliminating your debt, and it is a reason to celebrate. Celebrate the changes you have made, celebrate the person you are becoming and celebrate the fact you aren’t where you used to be. Give yourself a pat on the back… and then make your next payment.
Step Four: Know you are not alone
Repeat after me, there is no shame in finding yourself in financial difficulty, you are not a failure, you are just in debt! Okay, repeat it again.
Shame and general disappointment are feelings associated with debt. I am not advising you should treat your financial position casually but you should not allow it to negatively stress you. The chances are almost everyone you know has some form of debt. Financial difficulty and overcommitting to credit is a position many individuals find themselves. Bankruptcy, Debt Agreements and hardship provisions are provided for in legislation for just these reasons.
Step Five: Seek Advice
If I had a broken leg, I wouldn’t go to the butcher or if I needed to know about fishing, I wouldn’t ask a painter, unless they used to be a fisherman of course. The same goes for debt reduction. A professional can talk about your situation and work with you to come up with a solution that will get you out of debt sooner and in a manner that is affordable for you. The chances are as well, the amount you would pay for their services will be far less than the amount of money you save when you look at the big picture.
It is hard to get out of debt, but it doesn’t have to be an impossible dream. Through taking action and committing to paying off your debt it is absolutely possible to live a debt free life. Contact Debt Cutter today to start down the right path.
Case Manager of Informal Arrangements at Debt Cutter
Chipo runs our Informal Arrangements Department here at Debt Cutter. She uses her passion for problem solving to come up with personalised solutions for all her clients and their individual needs. Chipo believes anyone at any stage of life can experience financial difficulties, so she uses her expertise to come up with strategies to get her clients out of debt as soon as possible with as little stress as possible.