80% of Americans have some form of debt. When we picture debt, we tend to think of extreme cases. Losing your house or filing for bankruptcy are extreme examples of what can happen when debt isn’t dealt with. However, most of the 80% isn’t there yet.
The thing about debt is that it doesn’t usually start out as extreme. Typically, it starts small, like applying for a lower limit credit card or taking out a loan, and then builds over time. That’s how so many people end up in the 80%. Because before you realize it, all of those little bills add up and you don’t know what to do.
So how do you keep that small amount of debt from getting worse? Well, there are five ways to get yourself out of debt before turning to bankruptcy.
1. Admit You Have A Problem
If you want to be debt-free, you first have to admit that you have a financial problem. Something isn’t right in your financial life and it’s time to acknowledge and deal with it. Admit that there’s a problem, and start looking for the source.
2. Write A List
Write down a list of all your debts from smallest to largest. Instead of trying to decide which one is most important to pay off, start with the smallest. You’ll get it paid off the fastest, which should improve your stress levels and credit score.
Move up the list working towards your largest debt. Make sure you’re paying at least the minimum on all of your debts while you work on paying off each one on the list. If you have the money to pay a little more than the minimum, that would be ideal.
*** Tip: If your minimum payment for your credit card is $30, pay $33 if you have it to give, and watch how quickly your balance will lower and how high your credit score will increase. Another tip would be to pay early if possible. If your credit card bill is due on the 15th of every month, try paying it a few days ahead or even the day before… That will also increase your credit score.***
3. Cut Unnecessary Expenses
Cutting unnecessary expenses comes down to deciding what you value. When you go to make a purchase, ask yourself how long you had to work to buy that item. If something costs $150 and you make $15 an hour, that item costs ten hours of your time. Is that item really worth it?
When you decide what you value, it’s easier to eliminate what you don’t.
4. Understand Your Income Vs. Your Expenses
You can’t get out of debt until you have a basic understanding of your income vs. your expenses. The best way to do this is to add up what you bring home after taxes in one month, and then compare it to what you spend every month.
You can’t get out of debt if your income is less than your monthly expenses… you’ll always be putting something on credit or playing catch up. There are two ways to solve this:
- Option one is to find a higher-paying job or a second job. This will increase your income, and allow you to get out of debt.
- Option two is to lower your monthly expenses. As was mentioned in number three, you can start by determining what your unnecessary expenses are, and cutting them.
Once your income is greater than your expenses, you’ll be on track to pay back your debt.
5. Start Selling
What do you have that you don’t need, and can it get you money? An extra car, your last iPhone, there could be a gold mine at your house. Start going through your possessions and see if you can part with anything to earn some extra cash.
What Do You Do If That’s Not Enough?
These suggestions may not help you eliminate debt completely, especially if it’s gotten beyond a certain point. So what do you do then? Who can you turn to when your financial situation has gone beyond repair? Turning to bankruptcy will be the solution to not only eliminate some or all of your debt but to also give you a new financial start.
Rules and regulations vary depending on where you live. In Mississippi, you can be exempt from the liquidation of certain personal property during bankruptcy if you hire MS bankruptcy attorneys to help you. That can include things like income from disability insurance or payments to a qualified pension.
Every location has different rules so it’s worth hiring an attorney to get you the best possible outcome. They know what the best course of action is and they’re used to handling the legal proceedings.
These five ways to get yourself out of debt can help you turn your financial situation around and improve your life. Start putting them into action today.