Financial Foundations: Recovering From Debt One Step at a Time

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If you are in debt, rest assured that you are not alone. It can happen to anyone. People get into debt for a variety of reasons. Some people lose their jobs, while others have unforeseen medical expenses or other unexpected bills. You may not even be sure how exactly the problem happened.

But now that you are in debt, how do you get out of it?

The easy answer is that you either have to spend less or earn more, or do some combination of the two. But often this is a lot easier said than done, especially when it comes to spending less. Fortunately, there is a simple 3 step process for getting out of debt:

  1. Understand the Problem You Are Facing

Before you can solve your problem, you must first understand it, and understand it in fine detail. You have to know who your debtors are, the exact amount of debt you owe and the interest rates that you are paying on this debt. So, collect all your bills and get yourself a pen and a piece of paper. With this, you will create 3 lists.

On the first list, for each credit card debt or other loan you have write out the name of the debtor and how much you owe, and then add up how much money you owe in total. On the second list, calculate how much you spend every year on interest payments. Then, on the final list, figure out just how much of your monthly salary goes to paying your debt.

All this will help you understand just how big (or little) your debt problem really is.

  1. Determine How You Can Spend Less

You will never get out of debt until your figure out why you got into it. You need to start tracking how you spend money. Again, get out a pen and a piece of paper, and this time collect your receipts for the month. Go through each one and ask yourself if this expense is something that you really need, or if there is a way you could somehow spend less to get it. Either way, you must change your spending habits and reduce your expenses.

If the sheer number of receipts makes this task a little overwhelming, consider getting an expense tracking program. Many good ones are free, such as those offered by Quicken and Mint.

  1. Get Help

Many people, when facing debt, fail to realize that they do not have to face it alone. Or solve it alone. Get your family involved. You can even get your children to help. Together, have a meeting and try to find ways to cut expenses.

There are also many organizations that provide debt advice. Do not be afraid to ask strangers for help. Do not be ashamed, either. Experts can sometimes come up with solutions to your debt problems that you would never think of yourself.

In conclusion, being in debt is not a permanent state. You can get out of it with a little determination, analysis and, most importantly, help.