Help! I’ve Fallen in Debt and I Can’t Get Up!

When you think about financial matters are you overcome with dread? Do you get a giant knot in the pit of your stomach when you think about trying to pay off your credit cards? Do you panic when the phone rings and check caller ID against your known list of bill collectors? Is there a pile of unopened bills sitting in a drawer so that you won’t have to think about them right now?Brother, I’m here to tell you that I’ve been there. I still hate voice mail as a result. Knowing that there was going to be a message on my phone that I don’t want to hear has scarred me for life. Even now that I generally have my finances under control I still have a visceral reaction to the notification on my phone that I have unheard messages.

For almost 15 years I lived an absolutely miserable financial existence. Some of it was my own doing, I didn’t track my spending as closely as I should have. But I generally managed to live within my means. My problem was that I was married to a spending addict who couldn’t do the same. And so each month we fell deeper and deeper into debt. Even when I managed to get a job which doubled my gross income the next year we were even deeper in debt than the year before.

This isn’t intended to be a post about how bad I had it though, but rather a ray of hope and a path for others to follow. I want to offer some simple tips that you might use to make your financial situation more tolerable and get you back on the path to financial freedom.

Step 1. Set up all bills you can for electronic payment (and make payment automatic).
It’s significantly faster and easier to pay bills online. And if you can make the payment automatic, perhaps simply paying the minimum amount due. This will help you to avoid late fees which , I’m sure you are already aware, are incredibly painful. This first step can help you from falling deeper into a financial hole through late fees.

Step 2. Cut up all of your credit cards but one.
Don’t cancel your credit cards straight away. This can actually hurt your credit score and it doesn’t get your bills paid any faster. But by cutting them up, you become less likely to use them. You may need to cancel credit cards at some point, but not today.

Step 3. Write down all of your recurring charges and eliminate any which aren’t absolutely necessary.
This includes things like cable, Netflix subscription, cell phone, magazines, etc. Every sacrifice you can make here pays off quickly in step 4.

Step 4. Snowball your debt.
Find the credit card with the lowest balance and make as large of a payment to it as you can each month until it it is paid off while paying the minimums on the rest. once that card is paid off, take the money you were paying on the first card and pay it on the second in addition ot the minimum payment. Repeat until all cards are paid off. Strictly speaking, this inst’ the fastest way to pay off your debt, but it is the most satisfying.

Step 5. Begin building an emergency fund.
It doesn’t have to be a large amount, but try to put away some amount each month until you have $1000 in cash reserve.

I’ll certainly have more posts on debt reduction in the future, but I wanted to get this one out so that readers who may be feeling lost and alone know that others have been where they are and survived. You can too. I promise.