Debt of any size can bring up overwhelming feelings of helplessness, shame, depression and anxiety.
These feelings can be so consuming that they paralyze us, keeping us from taking the kinds of proactive steps that can actually help us become debt free.
Build debt repayment into your budget like you would your rent — a necessity — as opposed to your Netflix subscription — a discretionary expense.
To finally face your debt, it’s important to recognize these powerful psychological aspects of debt, acknowledging first and foremost that you are not your debt. And wherever you are today, falling a bit behind on your bills or already deep in debt, does not determine where you can go in the future.
These five steps can help you push through the overwhelm so that you can live your life excited about your future instead of feeling trapped by your past debt.
1. Face the Numbers
If you’ve avoided opening your credit card bills, student loan bills or medical bills in the past, the first step is to face the reality of your situation. That means confronting the numbers.
You can’t make a plan for how you’re going to pay off your debt until you know exactly how much of it you owe. So open your bills or call up your lenders and start making a list of what you owe, to whom, your minimum monthly payment and the interest rate for each of your debts.
2. Create an Action Plan
If you have multiple debts, your first question is probably, what debt do I pay off first?
There are two popular options: the debt snowball and the debt avalanche.
Snowball method: Make the minimum payment on all of your debts, then put any additional money toward the debt with the smallest balance.
Avalanche method: Make the minimum payment on all of your debts, then put any additional money toward the debt with the highest interest rate
In both of these strategies, you make the minimum payments on all of your debts to avoid default, late fees and hurting your credit.
As long as you’re making more than the minimum payment on your debts, you’re moving in the right direction, so don’t get stressed out or stuck on picking a strategy. Just pick one, stick to it and you’ll be better off.
3. Prioritize Your Debt Repayment
Once you’ve confronted the numbers and settled on a debt repayment strategy, it’s all about following through on your debt repayment plan.
To do that, it’s important to start thinking of your debt repayment as a priority, something you build your life around as opposed to something you fit into your life if you can find the space, time, energy, money, etc.
Consider what debt freedom will actually feel like to help you stay motivated as you work through the debt repayment process. How might your life actually change?
In other words, build debt repayment into your budget like you would your rent — a necessity — as opposed to your Netflix subscription — a discretionary expense.
Building your debt repayment into your budget may require some adjustments to your usual spending. It might mean making some sacrifices or hustling for more income. It might not always be fun, but the changes are temporary, and the pay off is debt freedom.
Speaking of debt freedom, consider what debt freedom will actually feel like to help you stay motivated as you work through the debt repayment process. How might your life actually change? Will you be able to apply for the mortgage on your dream home? Will you be able to take that trip you’ve been planning? Will you be able to sleep better at night?
Whenever you lose focus and start getting discouraged, remember to reconnect with these goals and the feeling of achieving them.
4. Stick With It
If you have a setback during the debt repayment process, don’t beat yourself up. It probably took many months, even years, to get to where you are today, so it might take some time to get to where you want to be.
By taking proactive steps like facing your debt and creating a plan for paying it off, you’re already well on your way to that new future. So celebrate every victory.
Every time you send in an on-time payment and every time you pay more than the minimum on a debt, that’s a win. Track your progress and celebrate each step in the right direction.
5. Stay Motivated
Finally, find some support. To stay motivated, read books, listen to podcasts and read the stories of other people who’ve gotten out of debt and transformed their lives in doing so.
You can become debt free too if you make the commitment to follow through and implement the debt pay-off plan you’ve built!