Being in debt is one of the worst feelings in the world. You just can’t feel like you can control your financial situation. It is even worse if you’re in debt because of something outside of your control, like medical expenses or caring for a loved one. Regardless of the reason you’re in debt, there are actually a lot of different approaches you can take to start being in control of your finances again.
Net Worth with Terry Bradshaw presents some of the key ways you can manage if you’re buried in debt. There are a lot of different debt management programs out there, but you really don’t need to pay for any of them because they are really on the following characteristics. If you want to get out of debt, follow these methods.
Get a Plan Says Net Worth
The first thing you need to do is get a plan to help you conquer your debt. You can start by laying out all your debt and writing down the balances and the interest rates. It is extremely important that you are organized when it comes to your debts, or else you’ll never be able to make progress in paying them off.
Once you have them all laid out on a spreadsheet, you have two good options to pay off your debt. First, you can pay them off in the order of highest interest rate to lowest interest rate. This plan works well because it eliminates your most expensive debt first, and then moves to your cheapest debt. This can save you money faster in the process.
The second most popular method to get out of debt is to start with your smallest debt first, pay it off as quickly as possible, and then move on to your next biggest debt. This method works well psychologically because by eliminating several small debts, like credit cards, you feel better about the process and get encouragement to continue. It is tough, though, because the victories start slowing down as you get to bigger and bigger debts.
Start Small
Regardless of what plan you think would work better for you, Net Worth TV reminds you that you can start with a small amount toward your debts regardless. Even if you only can put an additional $100 to your debt payments each month, over time, and following the plan, you will start to see huge improvements in the amount of debt you have.
You see, after you pay off your first debt, roll the payment you were making, plus the $100 into your next debt. That will pay off that debt even faster. Then, you just continue to repeat the process over and over until all your debts are paid off. This is commonly known as the debt snowball.
Start Saving and Investing
Next, it is important to remember to continue saving for retirement and investing in your 401k even when you are in debt. Too many people make the mistake of not saving for retirement when they are in debt, and they forget that they can’t get a loan for retirement.
Even in a worst case scenario, like having to declare bankruptcy, the courts and creditors cannot touch the money in your IRA or 401k. That is why it makes sense to continue to put as much money as possible into these accounts. Yes, you may be buried in debt right now, but you still need to think about how you’re going to live in retirement.
Net Worth TV on Filing for Bankruptcy
Finally, the Net Worth television series reminds you that you can always file for bankruptcy in a worst case scenario. Sometimes this makes the most sense for your situation because there is no way that you would ever be able to pay off the debts and still live your life.
This is not a choice to take lightly, but sometimes the only way out of a mountain of debt is to start fresh. The process isn’t easy, and takes a lot of time, but once you’re debt free, you can start rebuilding your credit and getting back to a normal financial life.