As a consumer debt expert I answer debt questions from readers on a daily basis about how to get out of debt.
It's a short and simple question that becomes easily overpowered and made opaque with a lot of emotions and misinformation that clouds the issue.
But if you stop, take a deep breath and take no action for a couple of days while you follow the plan I'm about to present, you will have a better shot of conquering your debt in a positive way.
Successfully beating back debt can be broken down into these major steps:
The secret to overcoming debt for a lifetime is to take what you can learn from your current situation and apply it moving forward. There's no sense wasting a perfectly good mistake, I always say, so the more introspection and understanding you can get about why you got into debt, the better you will be able to avoid that situation in the future. You already invested in the mistake, now let's get some return out of it.
Here are a couple of common introspection examples.
Maybe your debt is due to excessive spending. In that case you need to examine the underlying issues that caused you to spend unconsciously. Maybe you used shopping as a way to reduce stress and improve self-esteem. Tackling the debt alone does nothing to deal with what got you into debt in the first place. Without addressing the underlying spending issue you'll most likely just land back in debt again.
Let's say your current crisis is the result of an unexpected financial demand. In that case the underlying problem was an insufficient amount in savings to help you in your time of need or the inability to take action before you spent through your savings. Both issues can be overcome with awareness and avoidance in the future.
Remember: debt is the symptom, not the problem.
Before you launch into a panicked path of getting out of debt, slow down and take another a deep breath.
I need for you to make some good educated decisions about how to best deal with your debt that are informed with facts and not based on assumptions.
A typical knee-jerk reaction people have is to start a long path of paying back their creditors using every penny they can muster over a long period of time. That can be a critical mistake and easily set you up for failure before the debt is repaid.
That path may take five years or more in a credit counseling program. But what about bankruptcy, debt settlement, or a debt consolidation loan? Those are realistic options as well when appropriate. Don't discount any solution until you have researched it throughly. Don't assume.
If you need some help to evaluate the different options, use The Amazing How to Get Out of Debt Calculator to get an impartial overview of the pros and cons of each option.
Just keep in mind that generally the people you talk to at each debt relief provider, even the nonprofit ones, are motivated to enroll you or sell you their service. Some are even commissioned sales people. Just put what they say into that context as you continue to do your research.
In the end, the only one looking out for your best interests is you. Don't delegate your future to a stranger.
Once you've done your research and looked at all available debt relief options the time to implement the solution you selected is when you are confident that the solution is right and affordable for you. Once you feel you've decided on the best solution for you, take a night and sleep on the decision before you commit to it. I need for you to be sure, not react quickly out of fear and panic.
You need to be able to implement the solution and not look back and feel as if you made a mistake because you grabbed at the first promised solution that came along that sounded like it would make the immediate pain of the debt go away.
When you feel you are ready, implement the solution to deal with your debt with confidence and the comforting knowledge that you participated in making an educated decision about what was right for you.
Don't be afraid. You can do it. I believe that if you follow these three big steps you can make a well informed and educated decision that meets your needs and goals while allowing you to eliminate the painful debt from your life and do better moving forward.
You can do it.
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