Tame Your Debts

Tame Your Debts

Get Your Head Above the Water

You’re pulled offshore with rip currents that turn to violent waves bombarding you one after the other until you’re in real trouble keeping yourself afloat. Panic sets off, and you struggle to gasp for air. It is a scary place to find yourself in. You need rescue yet no one else sees you. It’s a test of survival, and you must gather up the will and concentration to swim back to safety.

When the state of our finances gets out of hand, it does feel like we’re drowning in a sea of obligations. It seems like we won’t make it unless we get external aid. The pressure intensifies when you deal with debt collectors coalesced with legal action. A tool that was supposed to be used for its advantageous benefits, like credit cards, can easily switch over as a tool of demise if mishandled.

We dragged on a long tail of mess from the 2007-2008 global financial crisis. Our banks averted risk by slashing our credit lines, which put our balances just below it with practically no room for utilization. Our interest rates skyrocketed through the roof, and our minimum payments have stacked up double, even triple. We got farther behind because of the cascade of events, and we weren’t prepared to absorb the shock, to say the least. We’ve depleted our savings by this point, and have revolved credit in an unsustainable, complicated series of transactions using debt to pay debt.

It looked like there was just no way out of it. But there was… It was indeed a sense of relief and accomplishment when we’ve finally paid off all of our credit cards. It took a drastic paradigm shift and many years of discipline and sacrifice. It also took effort over time, though I couldn’t fully claim consistency all the way through; It spiked, and it bottomed out because of our evolving life events. But we still made it out.

Friend, you too CAN and WILL make it out. Here’s some guidance on how to approach it, the same way that we did:

Communicate with your spouse or significant other

You need someone on the same team to pull the weight with you, and not to be dead weight. Come into an agreement and fuse your motivations to change your situation for the better. This isn’t a singular over-arching conversation. It calls for transparency of raw thoughts and emotions at every point possible, many times daily. Share your fears but also share your dreams with each other. Build a compelling picture together of the future that awaits you after you get past this trying phase.

Build a compelling picture together of the future that awaits you after you get past this trying phase. Click To Tweet

Refuse to be part of the statistics of money fights ending in divorce. Looked at differently, this is a time you can come together and strengthen your vows for better or for worse, for richer or for poorer.

If you are single, then make this commitment to yourself. Bring in the right accountability partner that will speak truth into your life. You need to establish a strong support system to keep you in check. It can be a parent, a friend, or a professional like a personal finance coach.

Create and implement a budget

It starts with the heart, which will pump blood into this entire undertaking so you can feel alive.

You simply must do this. You need to see the full picture and understand the movement of your money and scrutinize the direction it enters and exits your accounts. You need to be the one telling your money where to go, instead of your money telling you what to do or how to react. You have control over this area more than you know. Exercise that power.

There is your income side and then your expense side of the equation. Understand where it is critical to focus. Do you need to assert more effort into bringing in money? Then devise the time tables in planning out how to do that. But this needs to be more strategic than tactical – an investment in self, and a long-term plot for improvement in your career and profession, if you are to make a significant hit for a home run.

Devise the time tables in planning out how to bring in more money. But this needs to be more strategic than tactical – an investment in self, and a long-term plot for improvement in your career

Shiela Bernardo

The bunt hit though would be taming the expense side. There is an opportunity for you to streamline your spending. We had to cut out cable, alarm system, gym membership, salon services, subscriptions, eating out, and many others that didn’t particularly stand out to us before. Revisit bills that you can negotiate to be lower like your insurance, trash and recycling service, cellphone, groceries, recreation, and the like.

Implement the budget you created. It is an active document for your reference, and not one that you prepare then file away. This is the yellow and white paint lines on the road when you drive. You don’t want to go off-course and get into a collision. Stay in your lane and follow the rules of the road, and your travel will go smoothly.

Prepare a debt tracking spreadsheet

List down all your debts from smallest to largest and include:

  • Account institution name
  • Unique identifying information such as the last 4-digits of the account number
  • Account owner
  • Outstanding balance
  • Minimum payment
  • Due date
  • Method of payment (i.e., Bank’s bill pay, auto payment draft, mail check, etc.)
  • Contact information

This level of information from a bird’s eye view will give you a sense of control. For a sleep-deprived mother, it’s like maneuvering her way with rambunctious, unruly children that have been contained in a playpen, then all fell sound asleep at the same time. You just have to get a good look at each one in the bunch. You gain momentary peace and quiet to get your head on straight.

Employ a debt fireball plan of attack

Light it up on fire! (no, not literally)

A debt reduction strategy that worked for us is the debt-snowball method. Adjust your payment to render only the minimum amount due for every single item in your list, except the first one. Once the smallest debt is paid off, you proceed to the next one in line, hitting your list from top to bottom as quickly as possible. The intent is that any freed up payments and extra cash is dedicated to paying debts with the smallest amount owed, and you pick up more snow as you go along.

I liken the process to a magnifying glass that can start a fire through the use of heat from the sun. You position the glass so that the sun’s rays pass through the lens. More intense light due to focusing creates more heat per unit area at the focal point, then it goes aflame. Quite the contrary to use fire in illustrating a snowball… So it’s only fitting to alter the term to debt fireball! Since you too must get fired up so that you can be unstoppable and come out as a conqueror.

Leadership mentor Michael Hyatt puts it this way: “Review what happened. Preview what’s going to happen. Now create your plan”.

Go on. Get started today and re-write the way your story goes.

♥ Shiela Bernardo is a budget nerd who is keen to stay on track with her family’s financial goals. She perpetually seeks to demystify how to keep the house clean with two dynamic young daughters. She is a self-taught computer programmer balancing a career as Assistant Vice President in a Fortune 100 company. She blogs about family, faith, and finances in her spare time.

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