Whatever the reason for having debt, being unable to pay the balances you owe can cause feelings of shame, hopelessness and despair, and it can have a serious impact on your health. If you’ve recently ended up in a position where your finances are overwhelming you, then it’s time to take back control.
But how do you regain control when you’re constantly faced with payment requests, rising interest fees and calls from creditors? In this guide, we’ll be discussing what to do if you feel overwhelmed by debt, so that you can take control of your finances and boost your mental health.
Forgive Yourself for Past Mistakes
Before you even start to decide how you want to approach your financial situation, it’s important to understand that everyone makes mistakes, and when it comes to money there are a huge number of people across the country who struggle with financial security every year. Forgiving yourself for past mistakes is the best way to start fresh, and this will significantly help you as you navigate the next steps in your financial journey.
Identify Where Your Money Goes
The first thing to do when you start to take control of your finances is to sit down and identify exactly where your money goes each month. The easiest way to do this is by revisiting your old bank statements, and categorizing each spend into a different area, such as groceries, travel expenses or rent. This way, you can see which areas you might be overspending on and work out a plan to cut back. Some of the most common things that adults waste money on include:
Takeout
We all like to treat ourselves from time to time, but takeout and fast food makes up a huge proportion of the money that adults across the states waste every month, and for many this is actually a factor that plays into financial instability. Cutting back on the amount of takeout food you buy, and switching to home cooked meals is not only healthier, but it will significantly reduce how much you spend and can prevent you from falling into avoidable debt.
Car Payments
If you need to drive to work or for family commitments, then having a car that’s comfortable and reliable is important, but often there is the opportunity to cut down the car payment you pay each month by choosing a more suitable model. Instead of going for a top of the range or limited-edition vehicle, why not opt for something that can get you from point A to point B on a smaller budget?
Subscriptions
Subscriptions to products like dating apps or TV streaming platforms might seem like they don’t cost a lot when you sign up, but over time the cost of having multiple subscriptions can add up. Going through your subscriptions once a month and canceling those that you don’t use, or perhaps forgot to cancel a free trial of, can make a big difference to the amount you spend each month.
By overspending in these areas, or in other areas of your life, you’re far more likely to lean towards loans, credit cards or other forms of debt just to make it to payday. Cutting back on frivolous payments is therefore one of the easiest ways to start bringing your debt back under control.
As you identify the areas that you could cut back on, it’ll be easier to see which creditors you owe money to and how much your monthly payments are.
Make a Plan
Once you’ve got an idea of where your money goes each month, it’s time to make a plan to tackle the debt. Write a list of each of your creditors, how much money you owe them, and whether you’ve defaulted on any payments. This might take a while, but when you have your list together you can contact each creditor individually to let them know that you’re having trouble making payments and discuss your options. They may be able to offer a repayment plan based on your other debt and total monthly income or pause your repayments while you contact other lenders. Cutting down your expenditure to payments that are more manageable is the best way to give yourself some breathing space.
Get Out of Credit Card Debt
Credit cards have some of the highest interest rates of any finance types, so knowing how to get out of credit card debt is one of the most effective things you can do to take back control of where your money goes. The first stage of this process is to immediately stop creating more debt, and this includes halting any purchases on your existing cards, not opening a new account and addressing any upcoming payments. From here, there are a number of different approaches that you can take to get your overall credit card debt amount down, so if you’re looking to get out of credit card debt for good, you should take some time to research the opportunities that are available to you to put a stop to the spiral once and for all.
Consider a Debt Consolidation Loan
Debt consolidation loans are designed for individuals with a medium to large amount of debt from a number of different creditors, especially if those creditors charge a high interest rate. By taking out one large loan at a low interest rate, which is then used to pay off each existing creditor, you can save a lot of money on interest and late fees that might occur when you have difficulty making your payments.
Reach Out for Help
Finally, as part of your journey to financial control, you should never feel unable to reach out for help, no matter what stage of the process you’re at. There are a number of charities and organizations designed to support you to get debt free, and they will be judgment-free and ready to help.
Feeling overwhelmed by debt is never easy, but it is possible to get debt-free and transform your life if you take the right steps. By making a plan and focusing on paying off high-interest debts first, such as credit card debt and payday loans, you can get over the biggest hurdles early and find that the rest of the process becomes easier and easier.