1. Try To Stop Adding New Debt
If you’re in serious debt, it may be hard to see an attainable solution let alone any solution.
If you have so much cash flowing out to creditors that you can’t meet your basic needs with what’s left, step one toward recovery is to stop adding to that debt. This can be very difficult, especially if you are utilizing your credit cards to sustain your basic living expenses.
So a good option is to start by seeing if there is anything you can eliminate in your expenses. Then see what your income is and set a budget for your necessities: rent, car, gas, food.
2. Imagine your debt-free life
If you’re in serious debt, it may be hard to see a solution and even harder to move past your anxiety to implement it. Try visualization therapy.
Picture yourself debt-free:
How would you feel?
How would you live?
What longtime goals would you be able to accomplish?
You may be wondering whether you should spend time daydreaming when you might be getting a collection agency letter any day now, but this exercise can be extremely effective. Set aside time each day to visualize your debt-free life. This can help you stay motivated and stay on track.
2. Choose A Debt Strategy
Let’s say you’ve set your budget enough to pay significantly more than the monthly minimum on your credit card bills. You can either apply the extra payments evenly across all your accounts or choose a strategy that focuses on paying off one or two accounts first before moving on to the others.
Make all of your minimum payments, then have any extra money go towards the card with the highest interest rate, or pay only extra towards with the credit card with the smallest balance.
4. Ask your creditors for help
Many people don’t realize that creditors are usually willing to work with you, especially if you are dealing with a financial hardship. Explaining that you are unemployed, earning lower wages or have another difficulty with making your payments.
The best time to go to creditors for help is before the situation is out of control. Don’t wait until an account is about to be closed because you’ve had several months of late or missed payments. Tell the creditor you’d like to pay down your balance faster and want to know what services are available to help you manage your debt better. Most will work with you. You might feel really uncomfortable telling a creditor you can't pay, you might even cry when talking to them. However, they understand that sometimes people can't make a payment and are willing to work with you.
5. Consider credit counseling
If you can’t seem to come up with a viable debt elimination plan, turning to a nonprofit credit counseling agency may be the answer for you. These organizations provide services either free or at low cost to help clients get out of debt.
A professional credit counselor can help you review your debt situation and identify repayment options and money management techniques that you may not have thought of on your own.
NFCC, a nonprofit financial counseling organization, has a credit counselor locator to help you find assistance in your area. Call 1 (800) 388-2227, or go to NFCC.org to find the online locator.