A lot of us these days are realizing more and more just how much debt we have. The sources of these debts can be from student loans, mortgages, credit cards or vehicles. Sometimes the amount you owe can be downright overwhelming. Most of us don’t know where to turn and often make mistakes that we think are solutions. Such situations are bankruptcy.
Bankruptcy might seem like the easy way out. You hire a lawyer, give them all your bills and financial information, you make an appearance in court and voila! No more debt! Actually it is a lot more complicated and there are different chapters in filing bankruptcy. Even after you are declared debt free and the creditors stop hounding you, it doesn’t end there. Bankruptcy stays on your credit report for years and does a lot more damage and harm than good. Did you know that you do not have to file bankruptcy in order to get out of debt?
The first thing you need to do is stop spending and getting further into debt. Stop paying for things with your credit cards, stop taking out loans to pay for things and do not borrow from anyone anymore. You need to make a lifestyle change and force yourself to stop making the same mistakes. Tell yourself no to that new leather jacket, cd or car. Remember, your spending habits are what got you in this situation in the first place.
Then figure out just how far in debt you are. A lot of us don’t know the exact amount, which often shows that your situation is worse or that you are in denial. Go through all your bills, this includes hospital and doctors’ bills, credit card statements, auto loans, etc. Once you have all of this together make a list of the amounts you owe, from smallest to largest. The best way to do this is with a spreadsheet. You can get free spreadsheet software from Open Office.
Take a look at the smallest amount of debt owed. How can you pay for it? Is there something you can cut back on? Most likely there is. Instead of buying coffee every morning on the way to work, brew your own at home and take the difference in price and apply it towards paying off your first debt. By making small changes, you might be able to pay off that first debt within a few weeks to a month. After you have paid off one, cross it off your list and move on to the next one.
Once you pay off the first one, you will become even more motivated in paying off the second one. Take the amount you were saving from your first debt and apply it towards the second, along with more. The best way to do this is to try selling things you no longer need. You can do this by having a yard sale, placing an ad in the paper or online through Craigslist or Ebay. This will really knock out some of your debt. The little things really do count and add up fast!
Taking responsibility for your debt and paying it off without filing bankruptcy is very rewarding. It will teach you how to handle your finances in the future and not make the same mistakes. It might take a few years and will be very tough at times, but you just need to remind yourself that there is a light at the end of the tunnel. Keep a picture on your fridge or your desk that is your inspiration for getting out of debt, this will keep you motivated through the hard parts. Before you know it, you’ll be sleeping and feeling better and have lots to look forward to once you are debt free. The biggest pay off is knowing you did it yourself and not taking the easy way out!
