Get Relief from Debt Anxiety with a Debt Management Plan
The saying, “money doesn’t buy happiness,” clearly was not said by someone looking a stack of past due bills and debt obligations that need to be paid.
If you are in debt, you know that it can have a very real impact on your mood. Constantly worrying about money, whether you feel overwhelmed by credit card debt or are becoming depressed and anxious over your student loans, takes a heavy toll over time.
In addition to stress and anxiety, debt can negatively impact your relationship with family, friends, and loved ones; even your employer! For example, if you are struggling to meet your debt obligations, you may begin to resent how much your employer pays you or not giving you a raise. If your family depends on you for financial assistance, and your source of income isn’t enough to cover expenses and debt obligations, it’s easy to see how anxiety and resentment can spiral out of control.
Getting rid of your debt anxiety is easier said than done because the only solution is to pay it off. However, by having a debt management strategy – whether you choose to consolidate your debt or pay it off piecemeal – this is something you can do. And, you’re in good company: the average American has $15,950 in credit card debt and the average college student will graduate with $40,000 in student loans.2
Keep reading for five tips you can use to get started paying off your debt, so you can take back control of your finances and feel confident (not anxious) about your money decisions.
Five tips to get rid of debt (and the anxiety that comes with it):
1. Assess your current spending habits
Most of us use debit or credit cards instead of cash. After all, it’s easy and you don’t have to worry about if there’s an ATM nearby. While certainly convenient, this way of life alone can cause serious financial problems because you can use your cards without really tracking how much money you are spending until it is too late.
If this scenario seems familiar, take out a pen and a piece of paper and start writing down everything you purchased last month (Hint: it’s easy to track if you have an online bank account.) By writing down all your purchases, you’ll get a concrete idea about where your money went and show you why you’re coming up short on funds (that could have been used for debt repayment).
2. Always pay a little more than the minimum on your highest-interest debt
We admit it’s extremely tempting to make only the minimum payment on your credit card. After all, it’s human nature to prefer short-term gratification over long-term. But, when you make only the minimum payment on high-interest credit cards, you’ll be paying more in the long-run.
If you’re trying to pay off debt, always try to pay more than the minimum.
When it comes to debt management, it’s a marathon not a sprint – and the actions you take today, while seemingly small, can have big ramifications down the line.
3. Re-evaluate your income source
Living paycheck-to-paycheck stunts your ability to pay off debt. While you certainly aren’t alone (half of American families currently live paycheck-to-paycheck)3 , if you’re trying to pay off debt or consolidate, right now might be a good time to ask yourself some hard questions so you don’t have to be reliant on payday.
- Are you currently on the right career path?
- Is there another job or freelance work you can take on to bring in another income stream?
- Can you ask for a raise at your current job?
Make a list of all the things you can do (or at least try to do) to move the needle towards your main goal: financial freedom from debt.
4. Do some research into debt consolidation loans
With a debt consolidation, the bulk of your debt with the highest-interest rate is paid off by a new loan, with a lower interest rate.
By paying off the high-interest loans, you are using money that would have gone to interest and putting it toward paying down the balance of other debts.
5. Cut down on your expenses
One of the most obvious (and often the most painful, making it the most-ignored) pieces of advice around debt advice is to live within your means. Basically, don’t spend money you don’t have!
After tracking your expenses for the month, if you notice that you spend a lot on take-out meals or dining out at restaurants, eat in more. Think of how much money you could save and put toward debt repayments if you went to the grocery store and made your dinner for the next week.
And once you’re out of debt, don’t immediately start living beyond your means again. Start using the money you were using to pay off your debt to invest in a 401k or put it into a high-yield savings account. Remember, your financial life is a marathon not a sprint – and debt is only one part of the race.
* Please consult with your attorney, financial consultant/planner, accountant, and/or tax advisor for advice concerning your particular circumstances. The information contained herein is for general informational and educational purposes only and should not be construed as professional, tax, financial or legal advice or a legal opinion on specific facts or circumstances. The information or opinions contained herein should not be construed by any consumer and/or prospective client as an offer to sell or the solicitation of an offer to buy any particular product or service.