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Most people who end up in debt get there for different reasons. However, once you decide that you are tired of the bondage and uncertainty that comes with owing others money, it’s time to make a debt reduction plan that works for you. As you decide how to proceed, here are some tips to keep in mind as you create your debt plan:
Recognize the Issues Resulting in Your Debt
Your first step is to understand why you are in debt. What are the behaviors that led you to this point? Overspending? Lack of planning? Buying things that aren’t important to you? Realize that debt is more of a symptom, and that the real problem causing the debt might be something else.
Recognize that you need to make changes. Getting out of debt won’t work unless you identify the problem behaviors and then change your approach. Be honest with yourself, and make the necessary changes to the way you handle your money. Once you stop digging the hole, the better off you’ll be.
What’s Realistic for Your Financial Situation?
You might want to pay off debt as quickly as possible, and that makes sense. However, before you tell yourself that you are going to pay off tens of thousands of dollars of debt in a year, you need to consider what is realistic for your situation. Yes, there are inspiring stories of people who have attacked their debt aggressively and become debt-free in a relatively short period of time. But that’s not feasible for everyone.
Some of the things you have to consider as you put together a debt reduction plan include:
How much money do you make? How much can you really contribute monthly to the cause? Are there ways to make more money? Look for ways to improve your finances.
What other obligations do you have? Do you need to take care of legal obligations or other requirements as well?
Take an honest look at your finances. Perhaps it makes more sense to start small and then work on making changes that can eventually add up to doing more. This is one of the reasons that the debt snowball is so popular. It encourages you to start with your reality and go from there. You can also gain increased traction with a method called snowflaking.
Start from a place where you can keep with the changes, and then gradually accelerate your efforts. You need to make sure that your debt pay-down plan is sustainable over time.
Find Ways to Make Extra Payments Toward Your Debt
Next, you need to figure out how you can make extra payments toward your debt. Once you have figured out which behaviors need to stop in order to stop getting in deeper, it’s time to decide how you can make bigger payments on your debt so that you can super-charge your efforts.
Generally, there are two things you can do:
- Cut spending so that you can apply the savings to your debt.
- Earn more money and apply that amount to what you owe.
The best results are achieved if you can do both. Cut back on the things that aren’t important in your life and look for ways to earn extra money. That way, combined, you’ll have more money to put toward paying down debt.
Make Paying Down the Debt a Priority
Create a debt reduction plan that works for you. You need to include that debt pay down in your budget and make it a priority. Some of the popular methods of debt reduction include the debt snowball and the debt avalanche. Consider what will work for you, and then create a plan.
Stick with your plan, making it a priority to pay down your debt according to plan each month. In order to make this work, you have to decide that paying down your debt is a priority. You have to make a plan and take the necessary steps.
Family Situation
You also need to take into account the realities of your family situation. In some cases, it doesn’t make sense to force your spouse and your children into the same extremely austere measures you are willing to take. In order for your debt reduction plan to be successful, your whole family needs to be on board.
Talk to your family about the situation, and consider plans that you can all get behind as you move forward. Make sure that you are all contributing to the solution. Otherwise, you will just end up fighting a futile battle. Decide, as a family, what is most important to you, and base your debt reduction plan around that. You all need to sacrifice, but it needs to be something that everyone agrees is necessary.
This might mean that things move slower than you would like. When my ex-husband and I tackled our own debt shortly after we married, he didn’t want to aggressively pursue it. We ended up taking longer than I would have liked, but we did succeed. We also accomplish the feat at a sustainable pace that allowed us to change our habits permanently. I hate to admit it but his approach probably worked for the better. No matter how confident you are with your plan, it makes sense to get input.
Put together a plan that works for you and your family, and you will be more likely to succeed long term.
Get Help If You Need It
We all need help and support sometimes. This is true no matter what you are doing. When you are paying down debt, it’s especially important to find a support system. Whether you get someone to help you make a plan (this can be a smart move if you are overwhelmed and don’t know where to start), or whether you just need a little support to help encourage you and keep you on the right track, getting help makes sense on a number of levels.
In the end, you’ll be more successful if you have a debt reduction plan, and if you are truly ready to move forward.
Bottom Line
It’s important to realize that paying down debt is a long but survivable journey. Get excited and be as aggressive as you want, yes, but remember to figure out a plan that you can sustain.
There’s no shame if your situation only allows you to take things slow, but it’s a shame if you don’t make a consistent effort to progress. Chip away at it every which way and one day you’ll be able to enjoy that pina colada on the beach in retirement.