The simple truth is that being seriously in debt can make your life feel as if you were constantly pushing a boulder uphill and the minute you stop pushing, it just rolls back down to the bottom. You may be totally emotionally worn out from the burden of dealing with angry creditors or even debt collectors. The stress associated with this may even be causing you to suffer from headaches, heart disease, asthma or even obesity.
Getting those debts under control
If you’d like to get your debts under control, the first question you need to ask yourself is what do you mean by “under control”? If by this you mean that you have your debts organized, you know how much you owe, your payment dates and how far behind you are there’s a pretty simple answer to this. Just get out a spreadsheet, make six columns and label them lender, amount owed, payment due date, number of months in arrears, interest and minimum payment. Then fill in the blanks. You now have your debts under control in that they are at least organized and you know how much you owe and how much trouble you’re in.
Don’t stop there
The next step is also pretty simple. It’s to make a plan for paying off those debts. There are two methods for doing this. The first is called snowballing your debts. This is where you reorder your spreadsheet so that your debt with the lowest balance is at the top going down to the debt with the highest balance. The second method is called stacking. It’s where you reorder your debts from the one with the highest interest rate down to the one with the lowest.
Which one to choose?
The financial expert Dave Ramsey is credited for developing the snowball method. He believes it’s the best way to pay off debts because if you focus all of your energy on paying off the debt with the lowest balance you’ll get it paid off the quickest, which will give you momentum to start working on the next debt.
Those experts that favor the stacking methods say it makes the most sense because it saves you the most money. When you first do everything you can to pay off the debt with the highest interest that will not only save you the most money it will also free up the most money to begin paying off the debt with the second highest interest rate and so on. Of course, whichever of these methods you choose it’s important to continue making at least the minimum payments on your other debts.
Whichever you choose
Whether you choose the snowball method or stacking method for paying off debt, the important thing is that you’re now doing something about your debts. You should feel better and less stressed out because you organized your debts, you have a plan for paying them off and it should be much easier for you to handle your creditors and any debt collectors that have been harassing you.
The best debt management tip of all
Here’s the best and most important tip of all. You need to shred your credit cards and stop racking up debt. So long as you’re still using your credit cards or finding other ways to borrow money you’ll still be rolling that boulder uphill. It’ll be tough at first but if you pay cash for everything instead of using credit you’ll accomplish two important things. First, you’ll spend less. This is not a guess. It’s a fact. People that pay cash simply spend less than people that use credit. It’s just too easy to make impulse purchases when you can use a credit card. In comparison, if you have to actually pull $40 out of your wallet to buy that cool looking sweater, you’ll probably find it’s just a lot harder. Second, this will force you to save money for any big-ticket item you need – instead of just “carding it.” This, too, will save you money because you’ll be eliminating the interest it would have cost you if you’d used a credit card.
How to make this work
There is no real secret to this. You can simply use your debit card to pay for things instead of a credit card. The money will be taken out of your checking account and if you were to get to the point were there is no money left in the account, that’s it. You can’t spend any more. In addition to this, you will want to take a week’s worth of cash out of your nearest ATM every Sunday. You would use this money to pay for incidentals such as lunches and sodas at work.
If you just can’t make this work
In this case, your best option might be to hire a good debt settlement company. This would relieve you of the burden of having to fight with your creditors and collection agencies and help you get out of debt in anywhere from 24 to 48 months – depending on how much debt you have. The way these companies generally work is that you send them money every month instead of paying your creditors. As this money accumulates the debt settlement company uses it to pay off the settlements it negotiates for you that are normally about 50% less than what you owe. When you choose a good, reputable debt settlement company you will have a partner or debt counselor that will work with you every step of the way to help you get out of debt as quickly as possible. And isn’t that what you really want?