More Strategies for Getting Out of Debt
Part 16 in a series of how to be successfully self-employed
Here are some more strategies for getting out of debt, in addition to those introduced in Part 14, Dig Yourself Out of Debt, and Part 15, Get Rid of Credit Card Debt.
Start paying cash
This can be the hardest part of getting out, and staying out, of debt. Use a budget (see part 13, How to Set up a Budget) to estimate how much money it will take to pay for your needs until your next paycheck. Keep that amount in cash or checking so you can get through the month without charging anything.
After about three months, this will get easier. At first, you will be using a paycheck to pay the current month’s expenses and to try to pay off the expenses you charged for the past several months.
Unfortunately, just when you’re getting ahead, your car will break down, the annual insurance bill will come in, or you’ll crack your tooth and need a crown. When emergencies like this arise, that’s the time to pull out the credit card you’ve locked away. Then pay it off as soon as possible.
Start a savings account
Every time you get paid, save a little, even if it’s only a few dollars. Put it aside before you spend any money or pay bills. Putting this small amount away will teach you to be consistent. The savings account can eventually replace the credit card and be used to pay for those emergencies that arise over and above your budget.
Do this and you will accomplish two things: first, you learn to save and, second, you get into the habit of thinking twice before you spend. You are learning to “do without or pay cash.”
If worse comes to worse
If you are really trying to save and reduce your debt load and it just isn’t working, you might consider taking some of the following actions:
Work overtime. Let your boss know you need some extra cash and would be willing to work overtime.
Find a second job. The key to making this work is to take a second job that is entirely different from your full-time job. If you clerk all day and wait on tables all evening, your legs will fail before very long. If you sit at a desk thinking all day and go home to write all evening, your brain could shut down. Mix them up – sit at a desk all day and wait tables in the evening. Or work as a nurse all day and sell theater tickets in the evening. The change of pace can energize you.
Use a debt consolidation service. Call an organization such as Consumer Credit Counseling (CCC). Using the organization’s debt management plan, you can enter into a repayment agreement that you will be able to handle. The organization contacts your creditors. You send them money and they pay your creditors. To find an office near you, call the National Foundation for Consumer Credit toll free at 1-800-388-2227.
Confront Your Spending. If you have more than the average problem with spending and credit, you may need a shot in the arm provided by organizations such as Debtors Anonymous. This is a confidential organization, whose members will give you guidance and support at group meetings. For more information, check out the organization’s web site, www.debtorsanonymous.org.
Involve the family
It’s important for both spouses in the family to know their financial situation and to work together to reach their financial goals. In some families, for example, one may be a saver and the other a spender. If the saver keeps the family’s financial records and does not tell the spender what their financial situation is, the spender may continue to spend more than the budget allows.
Don’t cut the kids out of your money management planning. The more they understand, the more they can cooperate in cutting waste and cutting corners. They will take better care of products you buy when they see the work and saving that went into the purchase.
One way to show them graphically what your financial situation is and what you are trying to accomplish is to cash your paycheck in one-dollar bills. Count the bills out in stacks for each necessary bill or expense so they can see where the money goes and how much is left over (or how little). This little exercise may help everyone be more understanding about why they cannot have some of the things they want. They may also try to cooperate and save money themselves.
Children from six to eight can focus on how to set up a savings account, manage an allowance and deposit money in a savings account. They can make change and look for bargains.
Teens can help you research a major family purchase and help create a budget. They can also begin to learn how to make investments.
Free at last
Follow these steps and one day you will make that last payment and be debt free. Talk about a feeling of exhilaration – once you’re out of debt, you are free to make choices. You can go anywhere and do anything! And you’ll be one giant step closer to creating a life of your own.
Part 17, “How to Live on Less,” continues the series on being successfully self-employed.
Tags: Budgeting , Self-employment , Personal Finance , Recordkeeping , Spending , Debt
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