Submitted by Rachel R on Thu, 07/23/2015 - 12:23pm
You need a strategy to tackle your debt
Image Source: Flickr User John McStravick
In many situations, even the largest pile of debts can be handled if you truly dedicate yourself to conquering it. So long as you're not retired and on a fixed income, or dealing with an illness, injury or disability that keeps you from working at full capacity, you should be able to solve your average debt dilemma. First we'll look at a seven step plan to deal with serious debt and then one solution if you are in just way too deep.
#1 Know what you owe
One of the big problems with debt is that many people don't want to know just how deep they are in because it's scary. But this is the first step to determine if you can work up a plan to deal with what you owe, or if you need a more serious debt-dissolving alternative. Pull out all your bills and debt arrangements and add it all up. The total may be troubling, but you need the information.
#2 Figure out a priority
Sometimes it's best to prioritize pay-down of the highest interest debt first so you minimize interest costs. Credit card debts usually have the highest interest rates and are a wise choice to pay off first. But some people like to start with the smallest debt and work their way up to the biggest so they can build momentum to deal with the debt. This is strictly a personal preference.
#3 Know what you can pay
In addition to getting an accurate picture of what you owe, you need to know exactly what you earn and are spending. Gather paystubs and monthly bills, then track your spending for a month so you know where your disposable income is going (bills, debt, entertainment, clothing, etc.). All of this informs the next step and lets you know if you can truly afford to pay off all this debt.
#4 Start living leaner
You need to know how you're spending your money so you can cut back (if possible) and come up with a spending plan (i.e. a budget) so that you are living below your means and dedicating all possible cash to servicing your mountain of debt. To make more than minimum payments to accelerate debt payoff, you will need to spend less somewhere and that means lifestyle adjustment.
#5 Make more money
If you don't want to cut back on your spending, the other option is to try and increase your income to generate additional money to put towards your debt. This can mean asking for overtime hours at work, taking on a second job, or looking for side work. You likely have skills that can be marketed for weekend work like handyman tasks, housesitting or taking a gig as an Uber driver.
#6 Automate payments
Putting as many payments as possible on auto-pay makes sure you don't miss payments and incur late fees and negative consequences. With regular payments on auto-pay, you can then make additional payments online for debt you're targeting to eliminate at a faster pace. This makes sure you don't miss regular payments and allows you flexibility to adjust extra amounts each month.
#7 Devote windfalls to debt
Any time you get extra cash in your hands, put it to good use instead of blowing it. Whether it's a raise, an income tax refund, Christmas bonus or birthday money from your folks, this additional money can make the biggest difference by being applied to your debt. The next best choice is to put it in your 401(k) or to seed an emergency fund. But definitely don't blow it.
What if you can't cope with your debt?
In case of a major life event like prolonged job loss, divorce, illness or disability, if you're retired, or on a fixed income, it can be hard to bounce back from a mountain of debt. Perhaps you're earning a decent wage, but your debts have just accumulated beyond control. In any of these cases, you may want to turn to a more serious debt relief option like Chapter 7 or Chapter 13 bankruptcy.
Contact the North Carolina Law Offices of John T. Orcutt to find out more about how Chapter 7 can instantly eliminate many debts and Chapter 13 can buy you time to catch up. Call +1-919-646-2654 for a free consultation in Raleigh, Fayetteville, Wilson, Greensboro, Durham or Garner.
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