You’re only human. We know it’s easy to let debt get out of control. If you feel like you’ve fallen and you can’t get up, don’t panic. Digging yourself out of debt isn’t a walk in the park—but we promise it’s possible! By implementing a few straightforward solutions, you’ll be on your way to living debt-free.
Check out how to overcome even the most overwhelming pile of debt.
#1 Evaluate How Far in the Hole You Really Are
We’re not going to beat around the bush—taking stock of your debts isn’t going to be fun. Seeing how much you owe might make skipping town and living on a deserted island tempting, but don’t worry—that won’t be necessary (yet, anyway).
This step is essential because understanding what you owe, who you owe, and how much you owe will enable you to pay off debts strategically. Don’t just throw money at whatever bill you open first; think about the big financial picture, instead.
#2 Create a Strategy You Can Stick To
Now that you’ve taken stock of your debts, it’s time to make a game plan. There are several smart strategies you can use to start chipping away at what you owe:
- Transferring balances to credit cards with lower interest rates
- Using the snowball method to knock out small debt first
- Prioritizing by due date to avoid penalty fees
#3 Use Your Assets to Your Advantage
Depending on your situation, sometimes downsizing can make sense to help you get back in the black (no, not Back in Black, the 1980s hit AC/DC song). If you have assets like a ski chalet or beach house, selling them and using the profits to pay off debt can be a strategic move. Real estate almost always appreciates, so selling your second home will usually result in financial gains (be sure to file your 1099s to avoid any issues with the IRS).
Not only can you use the profits to pay off debt faster, but downsizing will result in fewer overall expenses. This will help you allocate money towards any remaining debt and prevent your problem from getting any worse. Looking at your real estate as an asset rather than something you’re emotionally attached to can help make this possibility hurt a little less.
#4 Do Some Digging into Your Credit Card Situation
Debt can be caused by everything from student loans, to medical bills, to unpaid taxes. While you might not have any control over debt from an unexpected visit to the hospital, you can control your credit card debt.
Take a look at some strategies to get your credit card bills under control:
- Pretend your credit card is a debit card—tell yourself that you can’t spend beyond what’s currently sitting in your bank account
- Cancel those cards you got talked into at the cash register (they’re designed to make you spend!)
- Use cash to prevent mindlessly handing over your card
#5 Live and Learn (Then Learn to Live Debt-Free!)
Beating yourself up over debt isn’t productive. You can’t change the past, but you can change the future. If you’ve found yourself in debt because of circumstances that were out of your control, acceptance is key to finding happiness and moving on.
If you’re reading this because of circumstances you did have control over, that’s totally okay, too! As long as you learn from your mistakes, you’ll be able to avoid making them again in the future.
One of the best things about your personal finances is that you can always change them.
We Promise There’s a Light at the End of the Tunnel
Digging yourself out of the hole is a process. It’s not going to happen overnight, and you need to be patient to start getting results. With that being said, the sooner you start this process, the sooner you can stop losing sleep over your finances.