Paying off debt can be overwhelming at first because of the amount of time it will take to become debt free. It’s critical not to get discouraged at this early stage. Here are 5 tips that can be applied to help consolidate and eliminate debt.
Step 1: Calculate How Much Debt You Have
It’s time to get real with yourself. You’ve put it off for long enough and now it’s time to figure out exactly where you stand. We have provided a helpful calculator utility that will enable you to input all sources of debt (car loans, credit cards, student debt, IOU’s). Once you have this filled out you are ready to begin. Until you are willing to face your problem, it will continue to haunt you and destroy your piece of mind.
Step 2: Stop Blaming Yourself
This is perhaps the most difficult, yet most important step. It’s time to let go. It’s natural after Step 1 to get distracted and start thinking about all the regretful decisions made that got you to this point. STOP! Blaming yourself is in no way productive and you can’t blame yourself into a solution. The only thing that is required it to admit that you are responsible for your current predicament (i.e. level of debt), and you are responsible for getting yourself out of debt.
Many times people get stuck right at the beginning of this process because they spend their limited moment of clarity blaming themselves and not on fixing the problem. Remember, blame is a secondary emotion and is always covering up for a deeper, more authentic emotion. It’s time to replace this ugly, complicated emotion with a pure one: forgiveness.
Step 3: Make a Debt Payoff Plan
There are a lot of things you can do at this point to massage the numbers. DON’T. We’ll come back to this, but for now it’s more important to develop a plan, then to optimize. Plus, it’s important to measure how significant your actions are going to be, and to give yourself credit accordingly. Remember, the emotional part of this is far more important than the financial part.
The debt payoff plan should consist of whatever extra money you can set aside in addition to all the monthly payments you are making currently. Put this in the calculator and see where you’re at. This will report a date for being debt-free. Take a note of this, because in the next step we’re going to bring that number down.