When it came to responsibility, I was a late bloomer. So, I found myself leaving college with over $10,000 in credit card debt and little idea of how to get out of debt. But little by little I was able to figure it out and dig my way out of the hole I created for myself.
It took a lot of work and perseverance. I had to adjust how I managed and spent my money, increase my base income (from 0) and even had to negotiate with my creditors. It can seem discouraging if you are deep in debt, but it is possible to get out of it.
Go With Cash
One of the first things that I did was to stop using credit cards and switching strictly to cash. To a certain extent I was forced this route as I had pretty much hit the credit limit on most of my cards. However, this forced switch turned out to be an incredible boon.
By switching to cash, I was forced into good money management. I could only spend the money that I had available and I had to plan ahead for future expenses to ensure that I had the cash to meet my basic needs.
After my experience, I believe strongly that a cash only method is one of the very best ways to manage money.
Well, when you are stuck for cash and deep in debt, it’s time to start selling the stuff that you accumulated during the times when you accrued your debt. When I was deep in debt in the early days, I remember gathering up all my old playstation games and taking them down to the local videogame store and selling them back.
Look around and see if you have anything expendable that you might be able to sell. It may not seem like much, but every little bit helps. And frankly, nothing sticks more in your memory as a lesson learned than selling some of your toys.
The silver lining is that you are converting unnecessary items to cash. This reinforces your new cash only lifestyle.
Increase Your Income
I know times are hard and the job market is tough these days. I was lucky in my timing for increasing my income as I got into debt as a college student when my income was essentially zero. I began working my way out of debt after I got out and started working. Believe me, when you are starting from zero, virtually any salary looks great.
However, I know many others aren’t in the same position that I was in terms of timing, but I wasn’t always that lucky. I was a typical starving college student for some time. And the summer right after I graduated was tough. I had to find any job I could to make ends meet. That meant taking jobs as a waiter, telemarketer, salesperson, etc… None of those glamorous positions were anything close to what I imagined I would be doing fresh out of college.
I have a basic rule for myself that whenever I get in trouble, go back to the fundamentals. To me, that means that when I was in trouble and looking for work, I took any job I could get, even if I was overqualified for it. A paycheck, even if it’s only a couple of hundred dollars does a lot for your self esteem and your wallet.
Negotiate with Your Creditors
I was so far in debt during my financial crisis that I was way in over my head. At that point, I had to negotiate some of my debt away, so that I could get myself back into a financially manageable position. This isn’t the best solution for everyone as it will seriously negatively impact your credit. However, it’s not unrecoverable, and my credit has since been restored to perfect status.
You need to balance your need to get debt relief with the negative impact it will have on your credit. Remember, that your credit will recover after sometime. (Generally 7 years from the time that you first went delinquent) If you decide that you need to negotiate with your creditors, you can do this yourself without outside help. I would suggest that if you only need to talk to a few creditors to try and call them yourself. If your debt is extremely complicated, then you might need a professional, but otherwise it’s not a difficult process to negotiate on your own.
I found that by the time your debt gets to the point where you are attempting to negotiate away delinquent debt, your creditors are fairly reasonable in discussing a resolution. Afterall, they want to get some return back.
For me, I was able to simply call the credit cards where I had the delinquent debt, and they transferred me to their debt resolution specialists. I let them know that I wanted to resolve my debt with them and they made me an offer. For me, in most cases, the offer was generally to cancel the portion of the balance related to interest and allow me to pay off half the principle and charge off the rest. (A charge off will stay on your credit report for 7 years)
If you are not delinquent, the credit card companies would not transfer me to their debt resolution specialists or negotiate any of the debt for me. So, if you are considering going this route, call them before making any payments.
If you’re not sure if you need professional help, there are debt relief professionals that will give free consultations. I would suggest that if you are on the fence, you can call a professional, such as Curadebt and use their free 30 minute phone consultation to get some free advice. They might point you in the right direction and then you can decide if you can do it on your own or whether you want to hire a professional.
Pay Yourself First
My last bit of advice is that no matter what you do, pay yourself first. That means work out your budget so that you are setting some amount of money aside for yourself. One day you will be out of debt and you want to have some savings when you get there.
Secondly, the frugal lifestyle doesn’t have to be lived in squalor. You need to be able to pay for basic necessities and have a little spending cash as well. Make sure that as you work your way out of debt, you aren’t depriving yourself to the point where it’s not worthwhile. You can have some fun money as well as some savings while you are paying off your debt. Make sure you account for these things before you give your money away.
I’ve seen debt from both sides of the tunnel. It’s a daunting task when you see a mountain of bills in front of you. The key is to take small steps to work your way towards debt relief. There are many things that you can do on your own to get out of debt. As long as you don’t get discouraged and keep moving towards a debt free lifestyle, you will resolve your debt problems over time.