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Getting out of debt isn’t easy. It takes patience and commitment. I had to figure out a way to do it, and these are the steps I took.
My ex-husband got us into a lot of debt when we first started dating. In fact, all the way up to being pregnant with our second child, we were still in debt that I was struggling to get us out of because of his spending, but I did get us away from bankruptcy levels of debt.
It wasn’t easy, and I did take a step that a lot of people will advise you not to do. Honestly, though, getting out of debt is one of those times where you do what you gotta do. I had to use a consolidation loan to get out of the debt we were in before it got even worse. Then I made sure I cut up all but one credit card (hidden for genuine emergencies) and didn’t take out any other loans. In case you need to modify the terms of your mortgage or loan, you may speak with a loan modifications expert.
Here are the four steps that we took. I’ve done it without debt consolidation in the past when it was just my own small debt, so I’ll include that as some of the steps to take.
Take it one loan at a time
Doing it without loan consolidation does work. You need to take one debt at a time and be really strict with your spending. You’ll want to choose whether the snowball or the avalanche method is right for you.
Focus as much as you can each month on one debt, and then pay the minimums on all your others. We chose the credit card that had the most to clear, which just so happened to have one of the highest interest rates. It was costing us the most in minimum repayments and interest, so it was the best one for us.
With the first one cleared, you can move on to the next debt and then so on.
When we went for loan consolidation, we only had one repayment. It was a lot easier to manage.
However, those who need to file for bankruptcy as their last resort should speak with a chapter 7 bankruptcy attorney to better understand this legal process. A bankruptcy attorney has the expertise to help guide those who are going through this process.
Still put some money into savings
While I always say you should put most of your money on debts, you still need a savings fund. In most cases, the whole reason you’re in debt is because you haven’t had savings to fall back on when there is an emergency.
Our savings fund meant that we were able to afford car repairs and a new car in the end without ending up in a lot more debt. It then meant that we had savings to relocate to another country, and then again to another part of that country.
You’ll be surprised at how a little bit of money in a savings account will add up. I’ve actually started putting all the estimated disposable income into a savings account as soon as we’re paid. I can then move money back into the current account if I find I’ve overestimated. With the money in the savings account, we’re less likely to spend on frivolous stuff.
Set a budget and stick to it
Your financial budget will become your best friend. Set something that is realistic, but gives you enough money to clear your debts and put some into savings. Now stick to this budget.
As you clear your debts, you’ll find you have more disposable income. As soon as I opted for loan consolidation, I worked out how much money was left over from the debts that we no longer needed to pay off. That extra money was put straight into a savings account. I made sure that was planned with the budget.
Sticking to a budget isn’t easy, but it becomes a habit.
Decide if it is really worth it
When it comes to spending, decide if it is really worth it. Of course, your rent/mortgage, bills, and food are essential but those extra luxuries could end up putting you out of pocket. Is it really worth the debt you end up accumulating?
I’ve become a lot more frugal with my money. I’ll look for ways to make a saving and turn down takeout just because they’ll be easier. Easier doesn’t mean worth it in money. I like that extra $60 in my bank, thank you!
You do need to be honest, though. For me, spending a little extra on my children is more than worth it when I see their faces light up. Spending money on myself isn’t always going to be worth it but could be needed.
Isn’t it time that you got yourself out of debt? Start looking at ways that you can make savings and create the budget to stick to. Start working hard to clear your debts and create a savings pot to stop yourself from getting in this position ever again. If you have assets like private jets that are in danger of being repossessed because of your debts, working with an airplane repo attorney is highly recommended.
MORE: Why a personal budget is so important
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