High Debt = Financial Melt Down
Are drowning in credit card debt or student loans or auto loan debt? If you are then the question is not if you will have a financial melt down, the question is when?
Debt overload affects people in different ways. Some folks shut down and never figure out how to dig out of debt. While other people know what to do, but are afraid to take the first step to correct a bad financial situation. Now if you were the federal government you could spend money you did not have and just print more money or tax the citizens. But you are not the federal government so you do not have those options. If you spend more money than you make you end up in debt. Then before you know it you are having a financial meltdown.
You got yourself into a financial mess, you can get yourself out of it. The way to get yourself back on your feet if you are in financial meltdown mode is to take a step back and analyze. Before you can change anything you need to understand what it is that you want to change. Change is not hard to do if you know the steps involved and follow through on them.
Just do not make the mistake of putting too much pressure on yourself. If you do, your frustration may cause you to quit altogether. Take it slow, one step at a time. It is okay if it feels like you are always taking two steps forward and one step backward, just be sure to always get back up and keep going. Remember, it’s not how far you fall, it’s how high you bounce after a fall that counts. It took a while for you to build up your debt therefore it will take a while to trim it back. So take a deep breath and let’s get started.
5 Ways To Approach Financial Meltdown
Step #1 – Say “Bye, Bye” To Credit Cards
If you are serious about avoiding a financial meltdown (or fixing the one you’re in), your very first step should be to stop accumulating new debt. If you are always adding on new debt you are just creating an endless cycle of debt, right? If you have used credit cards for everything, the fastest way to stop piling on new debt is to throw away your credit cards. If you have a never ending credit card balance you have become too dependent upon credit cards. There is no glory in carrying a credit card balance. All you do when you carry a credit card balance is become a slave to debt and the credit card company as well. Some people keep one credit card for emergency purposes only. If you can trust yourself to use your “emergency” credit card for “emergency” purchases only, you may want to do the same.
Step #2 – Always Pay More
The best way to work down your credit card balances is to always pay more than the minimum amount due, even if it’s just a few dollars more. If you just pay the minimum due every month how will you ever reduce and eliminate the balance? You won’t. And think about it, if you follow Step #1 and stop accumulating new debt you will have extra money to pay more than your minimum balance.
Step #3 – You Cannot Skip It
Ever wonder how credit card companies make their money? Regardless of how much credit card companies complain about late pays and missed payments, they love them. They make their money on the fees and interest they charge for late pays, missed payments (and balances). Save yourself lots of money by paying your credit card bill on time every single month and never ever miss a payment. Even if you cannot pay more than the minimum amount due, still never miss a payment or pay late. The fees and interest rates you will be paying for these two billing mistakes will destroy any progress you are attempting to make in Step#1 and #2.
Step #4- Don’t Be Fooled
Credit cards are easy, which is what makes them so attractive. Credit cards are easy to get and easy to use. They can easily trick you into believing you can afford to buy more than you can afford. And credit card bills are usually due about thirty days or so after your purchase, so it’s easy to forget how much you’ve spent until the bill arrives. If you can pay the credit card bill in full every month than you have a good grip on your financial affairs.
Step # 5 – Do That Budget Thing
The best money management tool you can use if you want to avoid being tricked by credit cards is a budget. Budgeting gets a bad rap, it sounds so elementary and old-fashioned, but it’s a great financial tool. If you are honest with yourself and live true to the budget, it really does work to keep you on a good financial track. When you are deciding on a purchase, if the item is not on your budget, it doesn’t get purchased, you cannot afford it, period!! If that is too strict for your lifestyle then ease up but do not eliminate the budgeting concept altogether. Digging yourself out of debt will be hard enough without fighting yourself on whether or not to use a budget. You need to be comfortable with the financial tools you use. At least try budgeting for a while to see if it is helpful.
Your Debt Starts And Ends With You
Debt is not fun, it is a curse. You may have had fun getting into debt but digging yourself out of it is a different story. It’s not impossible, it’s just may be a bit challenging, but you can do it. Start by changing some of your financial habits. If you are using your credit cards for your basic needs, food and clothing, you probably are buried in debt. Credit cards should not be used for your basics but instead for emergency, unexpected expenses (car repairs, medical expenses, etc.). You are in charge of your spending. Your debt started with you and you have the power to end it. Just do it.