1. Know what you owe. A lot of people who are drowning in debt, got into this situation because they simply ignored their debt. By being unaware of the exact amount of debt you owe, you think you have more money than you really do. Then you end up continuing to spend more than you make, getting yourself deeper and deeper into debt.
2. Take responsibility for your finances. Your finances are your responsibility, not your significant other’s or your parents’ (or your adult children’s) or a financial advisor’s. For couples, it’s common for one person to handle the finances while the other plays dumb. Just because one person seems to have a better knack for finances, doesn’t mean the other person is off the hook. The person handling the finances could be just as clueless as you and could be digging you both deeper into debt. You won’t know if they are really paying the bills or taking out cash advances for a shopping spree. You won’t know unless you take control of your own finances.
3. Differentiate between a “need” vs. a “want“. Do you really need a fancy car, designer clothes, or the latest tech gadget? To get to this point, you’ll have to do some soul searching. If you are secure with who you are, then you won’t need “things” to make yourself feel better. Consumer debt is usually tied to underlying insecurities.
4. Create a realistic budget that includes a debt repayment plan. Track your expenses for necessities for a few months on a personal budget worksheet. Make sure you spend less than you make. If your budget still exceeds your income, either find creative ways to save money or earn more money. Be sure to include debt repayment in your budget.
5. Pay more than the minimum amount due. If you are only paying the minimum amount due, you are only paying the interest for your debt and none of the principal or amount you owe. It’s like running in a hamster wheel and getting nowhere. Pay off your debt as fast as you can, and you’ll start to see the light at the end of the tunnel.
Great article. Creating a realistic budget and then trying to follow it takes quite some time! It can be done as long as there is motivation.