Your credit card debt started out innocently enough: you put a few items on your card to pay off over a couple months, like a new entertainment system or an unexpected, expensive auto repair. But then the next couple months you encountered a few more expenses, maybe added a nice meal out or a short trip to visit friends. You were paying the minimums, thinking you were staying on top of it, but now, all of a sudden it feels like your credit card debt grew overnight and is spiraling out of your control.
Whatever the reasons you found yourself leaning on your credit cards — things you wanted, things you needed, expenses you hadn’t planned — the result is the same: a low-grade panic that keeps you up some nights, a worry that there’s no end in sight.
But here’s the thing: you know you need to find a way out, stat. And that is the beginning of finding your solution: owning up to the problem, and reaching out to get information on how to fix it.
Here’s a step-by-step look at how you can assess your problem — and a few solutions to solive it.
Paying off your debt is only half of the problem you need to solve. You also need to understand how you came to be carrying burdensome debt, primarily so you don’t pay off your debts and then end up back in the same place a year or two later.
Debt can be thought of as a symptom:
Thinking about and answering these questions is a good exercise to engage in now, says Financial Consultant Raj Patel of White Mountain Partners, a financial firm that specializes in debt consolidation. “It’s good to think through what you could have done differently before you pay off your debt,” says Patel, “because you are in the thick of the pain of it. So assess what you might have done differently, and imagine yourself making different choices in the future.” This vision project sets you up for success by reminding you the debt didn’t happen by accident — even if it wasn’t intentional — and that you are in control of your finances, even though it may not feel like it right now.
Take some time to get up close and personal with exactly how much debt you are carrying. Make a list or start an Excel sheet of every debt you have and note the interest rate you are paying. Then, in another column, list of all your income streams and assets (house or retirement account — not your belongings), so you can get a clear picture of your overall financial standing. You’ll also want to have this list handy if you reach out to speak to people who might be able to help you, says Patel of White Mountain Partners. When he connects with someone seeking information about a debt consolidation loan, says Patel, the first things he needs to know are debts and income.
Having assessed what you owe and what you have, you can now see if “lean and mean” is the way out of your debt. Which means paying more than the monthly minimums. Cut out as many extras as you possibly can from your household budget: cable, streaming services, even your cell phone. Enduring short-term sacrifice for long-term financial health makes a big tradeoff like that worth it. AND it saves you a ton of money in interest — because compounding interest on your credit cards is what keeps you on the treadmill of credit card debt.
If you really want to get out of debt, you want to look at ways to bring in more income. There are many ways to do this, whether it’s asking for overtime from your main job, adding a new part-time job, taking on a side gig like driving an Uber, or launching an at-home business you can do in your spare time. Check out job boards to seek out temporary at-home work: technology means lots of different work has been able to be transferred to at-home work. Working extra hours may seem draining — but nothing is more stressful than carrying debt that keeps you from being able to make plans for your future.
One possible solution is to consolidate all of your debts, rolling them into a single, large loan that has a lower interest rate than your credit card debt. Private money lenders like White Mountain Partners regularly work with clients to help them escape sometimes dire financial circumstances. You can reach out to someone at White Mountain Partners to learn if debt consolidation is right for you. Start here right now.
For now, spend only the necessities to keep you fully fed, healthy and well. You should cut out expensive coffee habits, eating out, shopping as a mindless hobby (even if you buy on a deep discount, it is still costing you actual money), and consider having “staycations” instead of taking trips until your debts are fully paid off.
In addressing your debts, it is important to create a budget plan and then stick to it. Resist any temptations to deviate from the set expenses you’ve outlined, because doing only delays the rewards of being debt-free (and also continues to add more compounding interest to your debt pile). Embrace self-discipline to achieve your financial goals.
Whether you choose to pay off your debt yourself or go the path of a debt consolidation loan, be sure you commit to your strategy. Prove to everyone, most importantly yourself, that you can set yourself free!