Americans have a personal debt problem. Together we owe more than $13 trillion to our creditors. This is according to data collected by the Federal Reserve Bank of New York. It’s so bad that millions of Americans are struggling to figure out how to get out of their debt. Once they get into it, it seems like a revolving cycle of bad news and collection calls that never seem to stop. It’s really putting a burden on most of us.
Every single state in the country is incredibly stressed out about their debt. It touches most lives as we need to take out a certain amount of debt to do much of anything. You want to buy a house, a car, go to college, or many other things, we need to take out a loan. Most of us cannot afford these things on our own.
If you’re really struggling under a mountain of debt, it’s going to take a lot of work to get to the point where you’re financially free. Let’s take a look at five different ways to which you can help get yourself out of debt.
1) Write It All Down
You may be shocked to learn that most Americans would that do not know the total amount that they owe. You would think that this would be the first step for a lot of people. Yet, they just keep taking out more and more debt without really understanding how it works. They don’t even care about the impact that taking out all this additional debt or the havoc is causing in their lives. This is why you should go through all of your accounts and write down every single cent so that you can lay it out before you and look at what you all. This is the first step in taking care of the problem.
2) Pay Off the Smaller Debts First
If you’re able to do it, pay off your smaller debts first. Paying off some your smaller debts will increase your credit score and show a record of your ability to pay off your debt. Once you have some of the smaller debts out from underneath you, you can then put more money towards the bigger debts to get those paid off quicker.
3) Consider Your Spending Habits
One area that is necessary for you to look at is how you got into debt in the first place. Learn from your mistakes and grow out of them. If you just keep on taking more and more debt without learning how you got in debt in the first place, is not going to bode well for you. You need to stop the hemorrhaging of money. The more debt you take out, the worse your credit score gets and the more interest that you have to pay on that debt. Find out how you got there and stop it. You and your family’s livelihoods depend on it.
4) Don’t Take Out New Debt to Pay for Old Debt
Once one account gets so large that you can’t pay it back, some people will take out more debt to pay it off. But then are stuck with an even larger debt and paying off even higher interest fees. If you can’t pay off this first step, how are you going to pay off the second that? The goal is to get rid of debt, not take on more debt.
5) Declare Bankruptcy
Declaring bankruptcy should be a final solution. If there’s no other alternatives for you, then this might help you get rid of your debt and get a fresh start. You will have to restart building your credit all over again and it can take several years. If you have student loan debt, you cannot simply wipe away with bankruptcy so there are certain debts that you will have to continue to pay no matter what.