Debt is the worst. If you are filled with that heavy guilt and struggling to make any progress, it’s time to take a deep breath. Plenty of people dig themselves into a financial hole and there are lots of ways to get your bank account back on track. Check out the list below of the concrete steps you can take today to make some real headway on your debts.
Understand the Facts
Getting out of the financial nightmare starts with getting clear about exactly what you owe and establishing repayment priorities. The first thing on your to-do list: ask yourself “how much do I owe the IRS?” Once you’ve done some digging to find the correct number, write it down so you can come to terms with it. You might even want to put it on a post-it note somewhere you can always see, that way you make your finances a top priority. Once you know where you stand with the IRS, it’s easier to form a repayment plan that is tailored to your exact situation.
Assess the Damage
Before you try to make a budget, take a good, long look at all your other debts. Get clear about the terms of each loan and all the interest rates. Put them in an order that makes the most sense for you. Maybe it’s by how much you owe, smallest to largest. Maybe it’s by interest rates or certain conditions. Maybe you want to consider debt consolidation. Whatever your specific situation may be, having a smart payment plan is vital.
Now that everything is crystal clear and your debt is fully visible, your head is officially out of the sand. You can start chipping away at the money you owe. The best advice here is to be realistic. Avoid making your goals too aggressive or your budget too restrictive. If you’re going to stick to your plan, it has to be something you can live with. Focus your efforts on paying off one debt at a time, and pay the minimum payments on all the others in the meantime.
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Let It Be Easy
Okay, so paying off debt isn’t easy. But you can make it practically effortless. Set up automatic payments, so you don’t have to carve the time out every month or risk forgetting about them. This will also safeguard you from overspending because the money will pull out on its own. There are plenty of money management apps that will let you see all your finances in one place so you can always stay on top of your monthly payments.
Change Your Routine
Making a budget and changing your spending habits are two totally different things. Making a budget to get you out of the hole is reactive, while rewiring your money habits is much more proactive. You have to do them both of course, but changing your spending habits to reflect your repayment goals will create sustainable practices that will help you throughout the rest of your life. Are you paying extra money to have crazy fast internet for your video gaming hobby? Are you using a meal delivery service because you’re too lazy to shop? Try to cut costs and trim some fat on your budget in the short term, but also embrace these new shifts so that they will stick in the long-term as well.
This might sound counter-productive, but it’s not. Whether you’re a dog or a human, incentives and praise work better than punishment. With your new budget and repayment plan, you might not have a lot of room left for luxury, but you can find other ways to reward yourself for good spending behaviour. Set clear goal-driven incentives, such as spending an entire day watching your favourite TV show once you’ve paid off a certain percentage of debt. Becoming financially responsible is a difficult task, so it’s important to remember that you deserve a pat on the back for trying to better your situation.
Paying off debt can be a drag while you’re going through the repayment process, but the relief and freedom waiting for you at the finish line are unbelievably fulfilling. Prove to yourself that you can commit to this one payment at a time, and you’ll be so glad you didn’t just ignore all the money piling up. Besides, you’ll form some great financial habits in the process that will help keep you debt-free for the rest of your days.