How to Survive Debt and Bounce Back from a Financial Hardship
There’s a reason they call incurring debt “being in the hole.” That’s because debt can feel like a dark place that’s nearly impossible to climb out of.
However, where there’s a will, there’s a way. With a little knowledge and a lot of hard work, you can bounce back from financial hardship, head into the green, and be on your merry way to a brighter financial future.
With the following tips, you’ll survive, thrive, and kiss your financial woes goodbye!
#1 Get Your Facts Straight
If we’re being honest, this part might be the hardest.
Understanding exactly how much you owe (and to whom) can be a tough financial pill to swallow. No matter how much you’re in the red, looking at a negative number in its entirety can be disheartening.
However, organization and goal creation are important steps to take when trying to solve your debt problem.
Make a list (or a spreadsheet) that includes the following:
- Amount owed
- Minimum monthly payment
- Interest rate
- Due date
Keeping track of the details of your debt will help you create a more effective strategy to becoming debt-free. After you’ve tackled this step, it’s time to move on to step two…
#2 Establish a Payment System
Now that you’ve created a guide to your debts, it’s time to put it to use to start paying them off. Use your list of debts to establish a payment system that you’ll stick to.
Ensuring you’re meeting minimum monthly payments and sticking to deadlines can help you avoid incurring even more debt from added interest and late fees.
#3 Prioritize, Prioritize, Prioritize
In a perfect world, you’d be able to pay off all your debts at once. Unfortunately, this usually isn’t the case, which means you need to prioritize.
There are several different strategies you can consider when you decide on your plan of attack, but generally speaking, you should focus on paying off debts that have the highest interest rates first.
Helpful Tip: Credit cards usually have the highest interest rates, making them a good place to start.
#4 Explore All Your Options
Your debts can come from a variety of sources, and different help is available depending on what kind of debt you’re facing. Doing some research about what options are available to you can pay off—literally.
Take a look at some helpful get-out-of-debt resources.
- Mortgage Help – Being behind on your mortgage can be particularly stressful since it affects the roof over your head. If you’re struggling to pay your mortgage, contact your lender immediately, since waiting could result in foreclosure. Some lenders may be willing to set up alternative payment plans that will help you get your head above water.
- Tax Debt Help – Owing money to the IRS can have a negative impact on your entire life. Although tax debt can be overwhelming, there are options like filing for IRS uncollectible status or applying for an offer in compromise.
- Student Loan Help – Depending on if your student loan is public or private, there may be different options available to help you manage your student loan debt. If your student loan was issued through a government program, you should contact the Department of Education, as they can usually assist. With private student loans, you may have fewer options, but it can still be worth it to contact your lender to learn about student loan interest deduction.
#5 Don’t Dwell on Debt
As overwhelming debt can be, it’s important to remember there is a light at the end of the tunnel. Once you get your finances back in order, don’t dwell on your past mistakes. Focus on moving forward and use your experience as a learning experience.
Overcoming financial hardship is a big accomplishment, and you should be proud of the work and discipline it requires. Consider using resources to mitigate your anxiety, don’t forget to practice self-care, and keep your mental fortitude in check as you navigate this era.
It’s Time to Bounce Back
Now that you have the tools you need to start making positive changes, it’s time to start putting them into practice. Don’t wait. The sooner you start taking steps to tackle your financial issues, the quicker you can close the door on this difficult chapter and live a life debt-free.