I Have A Lot of Debt. Where Do I Start?

By Felicity Nie on in Category Debt
I have a lot of debt. Where do I start?

Overcoming debt isn’t just a matter of paying your bills on time every month. There’s an emotional journey that you have to navigate when you deal with getting rid of debt long term. Whether it’s credit card debt, personal or student loans, or a mortgage, owing money never feels good. How much you owe inevitably shapes your outlook on opportunities in life and can affect all aspects of your personal and professional development. That’s why dealing with your debt the right way is so important.

So, you find yourself saying, “I Have A Lot of Debt. Where Do I Start?

There’s two parts to answering that question. The first part is that you have to emotionally confront the burden of debt, and the second part is about developing the right financial strategy so that you choose the fastest and smartest way to pay off your debt.

Here’s a quick step-by-step overview to breakdown just exactly how and where you should start if you’re struggling with a lot of debt, overwhelmed with bills, or just trying to make sure you’re on track to pay off your debt sooner rather than later.

Don’t Let Emotions Hold You Back

Sometimes it can be too overwhelming to face reality and look at the balances on our bills. Anxiety was perhaps the greatest thing holding me back from dealing with my debt. I was disappointed in myself for letting this happen, and I didn’t know how and where to start to fix my mistakes. Financial blunders create blows to your self-esteem and also cause stress, but if you can simply take a step back and face your debt without attaching emotions associated to your self-worth and/or past actions, you have taken the first step towards improving your financial health.

Get Organized With A List

Of course, it’s easier said than done to leave negative emotions behind. Finding positive and productive coping mechanisms to deal with financial stress is a must if you want to tackle your debt head-on. Instead of wasting hours, days, and weeks just thinking about whether you can ever pay back all your loans, you can start doing something by getting organized.

An easy way to get started is by making a list. You should start by listing all your loan balances and your monthly contributions to paying them off. Once you’re accountable for all your debt and aware of how much money you currently have, you can start to balance the math.

Tip: Listing the interest rate on each loan by the balance will help you later in determining which loan to pay off first.

Be Honest About Your Budget

Budgeting doesn’t have to be about depriving yourself of a lifestyle you deserve or enjoy. When you make a clear budget, you are in control of determining where in your life you can make financial sacrifices. Let’s say you’ve decided to increase payments on your credit card debt by $100 a month. When you construct your budget, you should find a realistic place in your budget where you can save $100 for that increased credit card payment.

For example, I know that I will always need a good cup of coffee. Cutting that from my budget would be completely and utterly unrealistic. So even though cutting coffee would save me $100 (or more!) a month, it’s wouldn’t be a realistic plan or honest budgeting. Instead, I would probably consider sharing the expense of internet services with my neighbor which would save me at least $30 a month and limit eating out for lunch to twice a week which would save me at least $80 a month.

By being honest about your lifestyle when creating a budget, you’re more likely to achieve your financial goals. When you’re honest about your spending habits and behaviors, creating a budget actually helps you maintain your lifestyle while still making a dent in your debt.

Tackle High-Interest Credit Card/Loans First

As a general rule of thumb, you should prioritize any credit card debt or loans that have the highest interest rate. After all, the longer you hold a balance on that credit card or loan, the greater amount of money you owe as time passes. Refer back to your list of loan balances (with their interest rates) and monthly contributions to prioritize your payments. Once you’ve paid off your loans with the highest interest rates, you’ll be well on your way to being debt-free.

Ask for Help

Sometimes our past finances and our current situation can be too much to handle alone. Just remember, there are millions of Americans just like you dealing with debt. You’re not in this alone, and there are always ways to get help, support, and encouragement.

Often times, we just need someone to help us jump start our plans. If you’re ready to get rid of your debt once and for all and want to achieve financial freedom, consider enrolling into a customized debt management plan or speak with a certified debt management counselor to help you get started.

About the Author

Author:
Bio: Felicity Nie is a writer who enjoys getting the most out of her shoestring budget and works hard to pay off her student loans. Read more about her at felicitynie.com.

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