Americans tend to rely on credit to take care of significant expenses. Although it provides convenience for the short term, it can end up creating quite a financial hole. Debt can get out of hand quickly, and once it becomes a burden, it is tough to overtake. If you are experiencing this crisis right now, you should be comforted to know you aren’t alone. Research shows that the average American has around $38,000 in personal debt. Some cases are worse than others, but rest assured that there is a way out for everyone. These five steps can help you navigate your way to a debt-free life, one day at a time.
1) Audit Your Current Financial Situation
Avoidance is one of the biggest roadblocks for people attempting to live a debt-free life. It is common for people in your situation to pay monthly minimums without ever assessing the larger financial implications. Keep in mind that as monthly interest accrues, the hole of debt gets gradually deeper. Worse than that, paying the minimum enables you to continue to ignore your financial situation on a macro scale. This cycle prevents you from taking the first step toward alleviating a significant financial burden.
2) Evaluate Your Cash Flow
Measuring income is usually the simple part, but tracking outflow gets a bit more complicated. Mandatory expenses, such as rent, utilities, monthly minimums, and other easily traceable payments are manageable, but voluntary fees tend to cause the most problems for Americans. Nonessential items or entertainment can pile up quickly, and measuring how frequently these payments occur is critical to solving your debt crisis.
3) Identify Your Danger Areas
Maybe you have a habit of making impulse purchases on Amazon or other e-commerce shopping websites. Perhaps you tend to overspend on hobbies or collections. For people struggling with spending habits, these are called danger zones. No matter what yours is, the key is identifying it, so you can stop the pattern in its tracks and begin to reverse the process over time.
4) Choose Your Exit Strategy
If the situation is dire, you should consider filing for bankruptcy. Although this solution tends to scare people off, it is often the best way to create a more manageable debt situation. If you have not reached that point, there are several other ways to approach debt management. You can start paying off your smallest debt first, which is an attainable goal for many, or you can begin to chip away at your largest debt, which will shrink your interest rates over time.
5) Implement Your Plan
Getting out of debt and staying out of it are separate challenges. The best way to accomplish both is to have a plan. Once you have started your exit strategy to get out of debt, you should implement your plan for maintaining it, as well as preventing further obligations from cropping up. The best programs integrate your long-term goals, which will inspire you to stay on track moving forward.
This is a guest post by Written by John J Scura III, Esq. Partner, Scura, Wigfield, Heyer, Stevens & Cammarota, LLP. John has been Certified by The Supreme Court of New Jersey as a Civil Trial Attorney. Whether it is a personal injury case, bankruptcy case, litigation case or other type of matter, John wants his clients to participate in the decision making process toward solving their problem in the best way possible.