Here's how to start the climb up debt mountain

You haven’t checked your bank account in weeks because the tiny numbers depress you. Your kitchen table is buried under a pile of bills stamped with scary phrases like “Past Due” and “Final Notice.” You’ve given up on answering your phone because it’s always another bill collector.

When you’re in this place, the urge to just give up is overwhelming. It’s really hard to figure out how to keep going when you know that you’re going to have to work incredibly hard just to catch up to everyone around you. What is important is that you don’t. Don’t give up. Instead, remind yourself of this cold, hard, fact: lots of people have been exactly where you are right now and they have all survived. You will too.

Here is how you do it:

Numbers Aren’t Scary

Stop hiding from your numbers. In fact, work hard to find out exactly what your numbers are. Yes they are incredibly depressing right now, but this is the starting place for figuring out just how you’re going to climb out of the hole into which you have fallen.

The best way to figure out your numbers is to get a current copy of your credit report. Go through this report as carefully as possible and dispute anything you think isn’t true. Then use the information on your corrected report to call your creditors and lenders and find out exactly how much you owe and to ask them to send a current statement to you so that you can figure out how to start the repayment process.

Ask for Help?

Depending on your current financial situation, you might want to meet with a debt counselor or financial advisor. There are non-profit organizations that will help you sort through your bills and debts and figure out if you can start paying everything off on your own or if you should opt into some credit counseling or a debt consolidation program. If you’re debt-weeds are particularly tall, it is likely in your best interest to work with a program (always work with nonprofits so you don’t wind up paying too much) but meet with a counselor first to figure out what you should do.

Set Up a Budget and a Repayment Plan

One of the reasons that many people find their financial situations falling apart is that they don’t ever put together a budget. If you don’t yet have a monthly budget, now is the time to build one–when you know how much you owe and how much you should be paying each month. Write out a budget and start building the habit of tracking your finances–not just generally, but down to the penny. If you don’t want to use pen and paper, then at least try one of the many online budget apps. You can go with Mint or Personal Capital as the two front-runners.

Usually what happens when you write out a budget is that you will find that you likely aren’t bringing in enough to cover all of the things you need to buy and the bills you need to pay. This is when you need to start to look for ways to save money and, potentially, for ways to bring in extra income to make sticking to your budget easier.

Set Up a Savings Plan

It is important that, while you are paying down your debts, you are also working to save up money for rainy days, emergencies, etc. So many people wait until they’ve paid off their debts to start saving. Guess what. This is usually how you’re-mire yourself in debt. Emergencies have a way of popping up just when you think you’ve got a handle on your finances.

There are a lot of great savings plans that will help you save a little bit at a time every week so that you can build up a substantial savings within a year. Start using one of them.

Start Planning

Don’t wait until you’re debt free and you’ve built up a nest egg to start learning about financial planning, investment, etc. A good way to do this is to choose a financial news blog or two to start reading now. This way, when you feel financially stable enough to invest, you’ll know what you’re doing.

This is also a good time to start figuring out how you’re going to repair your credit. As you pay down your debts and build a history of paying your bills on time, your credit will start to repair itself naturally, but there are also things you can do to speed up the recovery process.

The point is this: you can get out of debt (take some time to read these articles). We’ve broken the process down in this article to look simple. It isn’t going to be simple; it will take some work. If you’re willing to work and work hard, however, you can get your finances under control. We promise!

Do You Know Your Credit Score?

Even if you don’t plan on getting a loan, a good credit score can affect your ability to get a job, a place to live, and will save you money whenever you need to borrow. If you don’t know your credit score, you can get yours free at Credit Sesame. It’s 100% free with no credit card required to signup. I’ve been using it for years to monitor my credit score.

Check Your Score Now

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One Comment

  1. I personally know people who are in serious debt but still don’t like to see where they really stand at. It’s important to know exactly what you owe, so that you can make a plan.

    Planning doesn’t work, if you don’t know what you’re striving for, but it’s pretty painful for some to really see where they stand.