No one would choose to be in chronic debt, yet, there it is, following us around like a depression cloud or an anxious bladder from a bad pharma ad. It’s the myopic grind we get used to, dutifully trudging along doing what we can with what we’ve got, and what we’ve got to pay, hoping tomorrow will be better.
The good news is you can make tomorrow better, you just have to make getting out of debt a priority. And we’re going to help you get there.
Choosing to get off that treadmill long enough to evaluate cash flow can transform tunnel vision into a panoramic view of possibilities — and yield startling results. Debt is a rut, but you can get out of it by by taking one step at a time.
It’s important to first understand your debt — including the costs and consequences associated with it — and then create a plan to eliminate it. Taking that first good hard look may not be easy, but it’s the only way to start digging yourself out — and you may find that becoming debt-free is easier and much less painful than you thought. Making the decision to get started can be very empowering and it can help you start to live a much better life financially.
Here are some questions and considerations to light the way.
6 blind spots prolonging your debt
1. What are your credit card interest rates?
Credit card interest rates are typically pretty high, which means that debt is costing you a lot more money the longer it sits there.
Here are a few ways to reduce what you’re paying in interest fees and get your credit card debt paid off faster:
- If your credit is good, call and ask for a reduced rate. It’s just crazy enough to work — and in fact, it works all the time!
- Laddering: Pay off your cards with the highest interest rate first.
- Take advantage of balance transfer offers, after research to choose the best card for your needs.
- You can also get free to low-cost debt counseling through the National Foundation for Credit Counseling.
Read more: Credit card comparison sites
2. Do you know your actual cash flow?
It may take courage to do the math, but if you want to get control of where your money is going, you need to take the plunge. If more money is going out than coming in, that’s bad! And it means it’s time to either increase your income or lower your expenses — or even better, do both.
Reduce non-essentials by examining your ‘must haves’ — like certain food indulgences or the entertainment options you can’t live without. Take a look at your monthly statements line by line and figure out how you can reduce what you’re spending on things you don’t really need. Don’t cut out all of it, just find ways to reduce it. If you want to get out of debt, it must become a priority.
Another way to reduce costs is to also look at your recurring monthly expenses and identify ones that are negotiable. If you haven’t done this yet, you could be saving a lot of money just by re-shopping your car insurance, looking for a cheaper cell phone plan and exploring cheaper entertainment alternatives at home. Here’s a list of more ways to cut costs every month.
3. Is the budget on paper or inside your head?
Make a visible budget and track your progress. Look at two totals every month — money coming in vs. money going out. Even incremental improvement can be a great motivator to take it up a notch!
Here are some great ways to start tracking your budget.
4. Teamwork: Get everyone on the same page
Ideally, every member of the household should be on board. This takes communication in order to make sure you’re all working toward a shared goal. Can the family cut phone, internet, TV or utility expenses? Use vacation planning as an incentive and reward to reduce expenses that aren’t necessary.
Read more: Save on home internet and cell service
5. Unforeseen events and financial triage.
There’s a vicious cycle of being blindsided by life expenses — things like medical and dental emergencies, veterinary visits and car repairs. It may feel like you can never get ahead, because there’s always something new popping up. But whenever possible, put off increasing debt until existing accounts are paid down. If a home repair can wait, let it be. Reducing non-essentials and/or increasing income can generate emergency funds to offset these unexpected but vital expenses.
Expect them and minimize the financial damage by taking steps to be ready.
6. Procrastination is a blind spot.
“He who hesitates is lost” may apply here. Don’t delay taking the above steps to eliminate debt. Time is indeed money in this case. The sooner you get on track, the better your journey will be.