Finance Blog

What to Do When Your Debt Becomes Overwhelming

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Getting into debt is easier than one would imagine. You might see the warning signs that you’re getting into too much debt, but before you know it, you’re in over your head.

Being overwhelmed with debt isn’t a good feeling. You can feel trapped without a clue as to how to get out. Here are some ways to get you back on your feet.

Stop Creating More Debt

If you want to get out of debt for good, you’ll have to stop creating debt. That means no more loans and no more credit cards. It can be difficult to break a bad habit, but it will be impossible for you dig your way out of debt if you keep adding on.

Toss your credit cards so you can’t use them and focus paying them off. Remove the account numbers from any online stores you frequently order from. If you’ve stored your credit card in a mobile wallet, you should remove it before you start spending irresponsibly.

Consider placing a freeze on your credit report to keep yourself from opening up credit cards on impulse. The freeze prevents businesses from checking your credit to approve a new application unless you unlock your credit report.

The time it takes to unlock your credit report will be enough time for you to reconsider what you’re going to do.

Go Back to Your Budget

Getting your debt under control will require that you get back to the basics. That means getting back to living based on a budget.

If you’ve never created a budget before, it’s a simple process that could really help you. Start by listing your income. Then, list out all your expenses, including the minimum payments on all your debt.

Subtract your total expenses from your income to see how much money you have left after all your necessary expenses are paid. If you subtract your expenses from your income and get a negative number, you’ll need to reduce your expenses to bring it below your income.

Avoid Buying on Impulse

As consumers, we’re constantly bombarded with advertisements. Resist the urge to buy anything that you haven’t budgeted for.

Usually, if you end up not buying something you think you really want, you’ll end up forgetting about it by the end of the day. If you can’t stop thinking about whatever it is, try and wait it out and see if you can afford it.

By only carrying the necessary amount of money to get you through each day can help you with your spending problems. It’s more difficult to overspend when you’re using cash because you can physically see how much money you’re spending. Once you’re out of cash, you can’t continue to spend as you could with your debit card.

Keep Track of Your Spending

Whether you use cash or a debit card, keeping track of what you’re spending throughout the day can keep your spending in check. You can use a mobile app or a notebook to keep up with all the purchases you’re making throughout the day.

Once you reach your limit, you know it’s time to stop spending. It can be rough at first, but once you realize how much money you’re saving you’ll enjoy all of the money you have.

Explore All Options

Contacting each of your creditors is one of the most beneficial things you can do when you’re having difficulty dealing with your debt. While you may be reluctant to call your creditors out of fear of what they may say, you’ll find that many creditors are willing to work it out with you.

Let your creditors know that you’re having financial difficulties, but have a strong desire to take care of your accounts. Ask whether there is a hardship program that can reduce or suspend your payments until your finances have improved. Do this with each of your creditors before your accounts get too far past due.

If you find yourself in medical debt, you can also consider talking to the hospital. It’s likely you will be able to set up a payment plan. You just want to be sure you take advantage of this option before it’s too late.

Consider Filing Bankruptcy

Many people try to avoid filing bankruptcy, but sometimes it’s the best option, particularly when you’ve exhausted all your other options and nothing seems to be working for you. By filing bankruptcy, the court will eliminate some or all of your debts, giving you the opportunity to start over again.

Prior to filing bankruptcy, you’ll have to go through debt counseling–in this process, you may discover a way to pay off your debt. If not, the court will allow you to proceed with your choice.

Try and Stay on Top of Your Debt Issues

It will take some time to rebuild your credit, but it’s doable. Use your fresh start wisely–avoid falling back into the same habits that led you into debt in the first place.

You’re not alone in dealing with debt. Millions of other Americans are also dealing with medical debt, credit card debt, and mortgage debt. If you actively work toward a solution for your debt, whether you pay it off or file bankruptcy, you can find relief.

The sooner you begin working to turn your situation around, the sooner you’ll have financial freedom.