Debt

The sooner you admit to yourself that you have a serious debt, the sooner will you be able to do something about it. Continuing with your habits that caused your debt in the first place, will do you no good. Stop it immediately and start thinking what can be done about it.

If your financial issues cause you anxiety, depression or insomnia, deal with them as quickly as possible so they don't prevent you from getting your finances in order. Check solutions for anxiety, depression, and insomnia.

Make sure you even know how much you owe, to whom, and what is the interest rate of a certain loan, credit debt or anything else. When you have a clear picture of all your debts, it will be easier for you to decide your next step.

Make a list everything you spend your money on. Food, clothing, going out, subscription, utilities, rent, everything. It will serve as a reminder that you can't continue like this, that your lifestyle is not synchronised with your earnings, and also as a tool to determine what expenses are not really that necessary.

DMP can be a great solution for you if you don't know how to deal with your debt. When you enroll in DMP, you receive free education, repayment plan, budgeting, intermediation between you and your creditors, and many other things. Check if you are eligible for DMP at credit.org.

Assess all your income and expenses. Hopefully, you will have something left after you pay for food, rent, bills, and any other expenses you cannot avoid. Everything that's left should go to debt repayment. When you know how much money you can use every month to repay your debt, you will also know how long will it take you to get rid of it and when can you start repaying your other debts, if you have them. This is good for you to know. And for your creditors as well.

If you are a compulsive debtor, a person who can't stop spending money it doesn't have, you might consider Debtors Anonymous. It's a 12-step program in which you will learn how to control your finances and develop more reasonable spending habits. For more information, visit debtorsanonymous.org.

Managing a debt can be an overwhelming experience. Your whole lifestyle has to significantly change for the next several months, or even years. If you don't have a clear goal in mind, your discipline might not be strong enough to sustain those changes as long as needed.

Start with a small goal you can easily achieve. And then another. And another. And so on. This will give you a sense of progress. As your debt decreases, your confidence and happiness will increase.

You might think this doesn't need to be stated. But surprisingly, lots of people start paying off smallest debts first, regardless of the interest rate. They feel that a psychological effect of clearing your small debts in a short amount of time will help them stay on track with their debt management.

While this argument has a certain merit, you should not ignore the interest rate. You should not focus on your $500 dollar debt with 6% interest rate while your $10.000 debt with 10% interest rate keeps piling up interests. Always pay the one that has the highest interest rate, no matter how big or small it is.

For solutions how to cut down on your expenses, check solutions for saving money.