Facing up to debt can be one of the most difficult things you can do. However, once you have overcome this step, you will be one the road to financial freedom. It may seem like you have a mountain to climb, but once you start making inroads, you will gain the motivation you need to keep paying your debt off and get back on track with your finances. So, with that in mind, read on to discover some of the steps you need to take when facing up to debt.
Face facts
The first thing you need to do is be honest with yourself. This is often the most difficult part of it all. How much debt are you in? How did you get into this debt? Yes, this can be a big slap in the face, but once it is over and done with, you can get on with the process of becoming debt-free. From gambling problems to losing work, there are many reasons why people end up in debt. Facing up to the reason you have found yourself in this situation is not for the purpose of punishing yourself. It is so you can get to the bottom of where you went wrong so that you do not make the same mistake again.
Draw up a budget
Now that you have had a harsh talk with yourself and you have figured out how much debt you are in and how you got there, you need to draw up a budget. Work out how much money you have coming in every month and how much money you have going out. This will enable you to see how much debt you can pay off per month. When drawing up a budget, make sure you include all of your incomings and outgoings, no matter how insignificant they may seem. Moreover, give yourself a realistic portion of living expenses every month. There is no point in establishing a budget if you cannot stick to it.
You can download a free Budget Excel Template from our resources section as a starting point to assess your financial position.
Pay off your debt with the biggest interest first
When determining what debt to pay off first, you should always start with the most expensive one, i.e. the one with the biggest interest rate. However, you still need to make your minimum monthly payments on all of your other cards.
Consider consolidation
Last but not least, a credit card consolidation is a good option for anyone that finds him or herself in debt. With this solution, all of your debts will be consolidated in one place, and you will pay one provider manageable monthly payments. This makes your debts much easier to manage and it stops them all from spiralling further out of control.
If you follow the steps that have been presented above, you will be able to deal with your debt so that you can experience financial freedom again and get your life back on track. It may seem like a long and difficult journey, but if you get on board today, the sooner you will arrive at your destination.
Do you have any tips for handling debt?