When your debt is spiraling out of control, it feels like that scary nightmare where you fall into a dark pit and unable to climb out. You seem stuck; and try hard as you may, you find yourself falling deeper and deeper.
That’s a true definition of financial crises!
Many Americans found their debt spiraling out of control for a number of reasons: job loss, medical crises, business and investment misfortune, divorce or outright reckless borrowing and irresponsible spending.
Out of control personal debt is a serious problem in America. According to a recent study by the Urban Institute titled Delinquent Debt in America, a whopping 35 percent of adults in America have a personal debt in collection.
That means the debt is so far past due that the account has been closed and placed with a collection agency or sold to a third party debt collector. This typically happens after the bill has not been paid for 180 days. (Federal regulations require creditors to charge-off revolving credit accounts after 180 days of payment delinquency).
This usually means that the debtor is so overwhelmed with debt that they stop making payments. Translation: your debt is spiraling out of control.
Just on credit card debt alone, ValuePenguin, using data from the U.S. Census Bureau and the Federal Reserve, found that American households carry an average balance of $16,048 … a figure which had gone up by 10% in the past three years.
Particularly disturbing, but not surprising, is that households with negative or zero net worth have the most credit card debt among all household categories -- and by a significant margin.
Whatever the reason you find yourself in a debt spiral, you must agree with me that it’s a stressful position to be in. Bad debt sucks.
And it’s time to bring that debt spiral under control. Here are 5 things you can do:
1. Assess the Damage
The first thing to do if you find yourself deep in debt is to assess your damage. How much do you owe, to whom do you owe it and what interest rates are you paying? You should assess everything in your litany of debts, but especially focus on consumer debts such as credit cards. You should also stop getting into more debts.
2. Track Your Spending
Find the root cause of your financial problems. That can only be done by tracking your spending. You’ll then begin to understand the weak spots of your spending habits and be able to focus on areas where you can cut back.
This is not the time to lie to yourself.
Most debit and credit card expenditures are easy to track – or you can do it the old way, by saving and adding up receipts. After you know where your money is going you can include the entire family in your plan to cut back.
3. Develop a Budget That Works
Developing and keeping to the family budget is often the difficult part. Don’t eliminate everything that the family enjoys, but do include them in the effort to trim some of the fat from your spending habits. There are many budgeting tools out there, both digital and good old paper and pencil. Many are free and others cost very little. Find which one works well for you.
4. Seek Professional Help
If you find that your debt is spiraling out of control, it may be time to seek professional help from a reputable agency to sort things out and help you regain your financial sanity.
A skilled debt counselor or financial adviser can help you make decisions on how to pay off your debts and manage your finances.
These people are skilled in areas to do with debt settlement, tax payment, saving as well as investment and by working with them you can stabilize your out of control debts and even aspire to a long term financial freedom.
5. Raise Your Income
While you’re getting your debt under control, you should also consider raising your income so as to give yourself a stronger financial security.
Consider asking for raise at work, or getting a second job, or better still, starting your own side business. In this digital age, the opportunities are limitless. With determination, curiosity to learn, and persistence, you can build a side gig that can give you enough income to pay off your spiraling debt.
It may take a while to unravel the tangled mess you find yourself in, but you’re sure to learn more about how to better manage your money and a little bit about yourself in the process.
