You've heard about "scarcity thinking," haven't you? And by now you know that what you believe and hold in your mind does influence what happens in your life. If you don't think you have enough (money, time, energy, etc.), then you probably are right. That can make you pull back from opportunities and afraid to take a chance even when there's a good possibility the outcome would be in your favor.
Then comes a time like now when business may have slowed down, money isn't flowing as easily as before, and that "rainy day" you were told to save for has arrived. Did you save? Or do you now find yourself in more debt than you planned and struggling to keep up? Are you even toying with the idea of filing for bankruptcy?
When the raindrops keep falling on your head, you need to get out of that debt that has you thinking in scarcity mode and holding you back. Before you go to an attorney there is a lot you can do for yourself that can help you avoid the destruction of your credit and the legal, financial, and emotional burden of bankruptcy.
- Admit it. You have got to admit you are in debt. Don't just think to yourself, "Yeah, I know I'm in debt." Stand up. Say it out loud. "I'm way over my head in debt. I lost control of my money and owe so much to other people that my life is not my own any more. I am going to change this."
- Total it. Now that you have admitted it, accepted the reality, and gone through the depression of where you are, now you need to sit down and total up everything you owe. You need to know the number, no matter how horrible it is. Is it $5,000? $50,000? What is the number?
Stop it. Stop doing what is getting you in debt. Stop the spending, don’t buy the car, don’t buy the clothes, don’t go on the vacation, stop what you are doing. You have to stop the bleeding completely and immediately.- Formulate it. Take your total debt - let’s pretend it is $20,000 – and list everything in order based on interest rate. Include all the credit cards, car loans, Mom and Dad, whatever. Now take the high interest items (often credit cards) and start throwing as much money as you can at those items first. Put off any you can; Mom and Dad will wait. Knock off high interest things first and then work down the list to the low interest last. In other words, make the minimum payments on the lower interest debts and pay as much as possible on the high interest stuff.
- Budget it. To make this work you need to have at least a general budget so you know how much you can use to pay down debt. If you bring in $100,000 this year, and have $90,000 in regular expenses and taxes, then you have $10,000 that you can put towards debt. Not vacation, not a new TV, no big parties. You are on a money diet, and the debt comes first. And since you've done step 4, you know that $10,000 goes more toward the high interest debts first.
Control it. In some cases you need to call some creditors. If you talk to them, they will often wait and/or work with you on a payment schedule. Just pick up the phone and initiate the call, hard as that can be. Most creditors would prefer to know there's a problem and work with you – they don't want to turn it over to a collection agency either. Let people know the story. Say something like, "Listen, this is what I have each month to pay my debt, and I'm allocating $200 a month to you. It will be paid off by this date…" and make a commitment to a date you will pay them in full. And keep it.- Get after it. You have a plan. You have control. Now get back to work and work your way out of debt. Stick to your plan, make sure to keep the payment commitments you made, and control your spending as you do. The only way out of debt is to work your way out of debt.
Rainy days are a fact of life. With planning, perseverance, and follow-through, you can survive the storm.
Patti Kouri, Accelerated Performance Coaching
Helping You Through Self-Made Limitations!
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Straight and to the point Thanks for sharing these timely tips.
Hi Patti - "The only way out of debt is to work your way out of debt." But what about my plan to win the lottery?
Seriously, this is great advice and really well presented. Thanks!
Liz
Working your way out of debt seems the new norm for most people. Most people like spending more than they make. It's that American Dream that can turn into a nightmare. Great tips towards discipline!