You’ve got companies that you owe money to calling, emailing, and sending you notices in the mail. Money and bills are constantly on your mind and you aren’t living a full life because of it.
You feel a bit broken. It’s impacting not only your home life but your career as well. It’s like your little secret that you are stuck with on your own. It’s beating you down and you need help.
Let’s go through some steps to get you out of this rough patch. You are 100% absolutely not alone.
Organize
You need to know what you owe that’s driving you crazy. It takes a bit of organization.
The easiest way to do this is to start by making a list. This should only take you a couple of hours at the most, depending on how far you have to dig to find the balances owed.
Start with going through your emails and physical mail and make a pile. Once you’ve gathered all the information, make your list. I love spreadsheets, but you do the easiest method for you at the current moment. A sheet of paper or the back of a napkin works fine. You can work on making it beautiful later.
It should look something like this:
My Debts
- Mastercard
- $5,000 balance
- Interest Rate 25%
- Discover Card
- $7,800 balance
- Interest Rate 19%
- Baptist Hospital
- $580 balance
- Mazda Financial Car Loan
- $12,200 balance
- Interest Rate 6.9%
- Plumbing Repair
- $295 balance
Total: $25,875
Make sure you total it at the bottom. There’s no wrong way to do this as long as all the data is entered somewhere on your list. You’re getting organized with all of the numbers together in one place.
When you’re done, take a quick break. You want to keep the momentum going but also don’t want to get burnt out and overwhelmed.
Priorities
Now rearrange your list of debts by priority.
Interest rates matter greatly when paying off debt. However, if you have a lot of smaller bills, prioritize those so you can knock them out.
Right now you’re overwhelmed. We want to get the list of bills much shorter in a quicker period of time.
Your finished priority list should contain very small amounts first. When you start getting into items with thousands of dollars that are going to take time to pay off, that’s the time you switch gears and start looking at interest rates. $5,000 with 25% interest rate should go before a $3,000 with 6% interest rate.
If you’ve got two $2,500 payments, put the one with the highest interest rate as a higher priority than the one with the lower rate. Check out my article on Paying off High Interest Credit Cards here.
Don’t stress about the list. If you’re unsure of what to put first, go with the lowest amounts. You can always change your game plan later.
Yay for having a list!! Organization is key!
The Amount You Can Apply to your Priority List
This is going to require paying yourself first. What’s the amount each week that you can take off the top of your take home pay and apply to this debt?
Do you have more than one income stream?
If you do have more than one income stream, could you take the lesser one and apply all of it towards your debt?
If you do not have more than one income stream, could you create a new one? Check out my article on multiple streams of income for ideas.
You want to find out what the minimum is you can get by with every month. Subtract that out of your take home pay. The amount leftover is the amount you need to pay your debts with first.
Analyzing the Time
Now go back and look at your total debt number. Divide that number by the amount you came up with that you can pay yourself first with.
Maybe your total debt is $15,000. The “pay your debt first” number equaled $500 per month. That means it would take you 30 months to pay off. Does that feel too long to you? That’s two and a half years.
Can you get this down to roughly one year by coming up with an addition $500 per month?
It’s easier to go on an extreme no spending budget for a year than it is to go on one for two years.
The timeline is really going to depend on how much you owe and how much extra you can bring in. Set a goal that is achievable with hard work.
Start Making Contact
When you’re ready, start contacting each company that you owe something to.
Let them know your plan to get back on track.
This may be stressful and hard to do. Some companies may demand some sort of payment. If you can pay them $25 to get them to stop contacting you for a month so you can focus on your priority list, do it. The least amount of contact you can get during this time, the better.
The idea is to pay everyone the minimum except for the one focus debt that you are putting all your attention on. That one debt is what you are making a priority and paying first.
If you aren’t receiving collection letters, you may not have to contact anyone and you can continue paying the minimum on everything except your one priority.
Having Support
You are not alone in your feelings. Millions of people are going through the same thing. There are support groups and surely friends/family that will listen if you will open up.
Bottling things like this up is not good for your mental health. The fact that you are searching for answers is definitely a step in the right direction.
You can get back on track. It will take organization and sticking to the plan, but it can be done. The more and higher paying side hustles you can acquire, the better.
Don’t feel like you’re ever alone in this.
0 Comments