Many of us benefited from sound financial guidance as we were growing up. We learnt how to manage our allowance, putting some aside for saving and giving; only spending a part of what we earned. But the pressures of modern life have undermined these lessons, while savvy marketers have learned just which buttons to push to convince us that we need their expensive products.
Add to this mortgage lenders who encourage us to take out loans at increasingly unrealistic ratios to our income, and it doesn't take much to tip things over the balance. An illness in the family, a hefty automobile repair bill, a drop in income; even welcome events like a wedding or family vacation can suddenly find us owing a greater proportion of our income than we can afford to pay out each month. Up go our stress levels, and -- at the very moment when we need to think calmly and clearly -- our brains seem to have become completely useless.
1. Do It Now
For many people the first stage of debt is also one of denial or avoidance:
It must be a mistake: I can't have spent that much on my credit cards.
I'll soon find a new job, there's no need to worry just yet.
As soon as dad's back on his feet we'll get things sorted out.
This is the wrong strategy. As soon as you're aware that debt could be a problem you should start to take action. Do NOT delay; don't wait and wonder or you'll find the days have turned into weeks, the weeks into months. Those maxed out credit cards are having mega interest added every month; dad's still off work and his welfare payments are about to run out.
2. Take a Reality Check
Make sure you fully understand your situation -- all of it. Take a long, cool look at all your income and expenses, prioritizing necessities like mortgage and food above desirables like subscriptions, clothes and the latest electronic gizmo.
This may seem obvious, but those marketers have done such a good job of convincing us we simply can't live without the latest all-singing, all-dancing cell phone that many of us now think it's a necessity, not the expensive luxury it actually is. Take it from me: your world will not collapse if you step back from the expensive cutting edge for a while.
Your reality check will help you benefit fully from the following tip. Understanding your situation and thinking about what you can do to reduce your commitments shows you're serious about managing your debt, and ultimately getting out of debt.
3. Start Talking
Embarrassment, denial, avoidance or disbelief leads many people to hide the reality of their debt. But you have a responsibility to tell your creditors about your situation, and the sooner you do, the sooner you can get them on your side.
Unless you've been drawing on savings, or you're still working those credit cards up towards their limit, chances are your creditors already know something is wrong. A late or missed payment that's out of character may send warning signals. The important thing to remember is you're not the only one.
Your creditors are used to helping people just like you work out how to manage debt. You're nothing special, even if you think you've grown two heads or have an invisible DEBTOR sign hanging around your neck. So swallow your fears, hide that embarrassment, and make an appointment today.
Armed with your reality check you can ask your creditors what help they can give you. You might negotiate reduced payments or suspension of interest charges, for example. And if all your creditors know they're included in the equation they're more likely to agree, so offering smaller payments to everyone rather than paying more to just one or two can pay off.
If you have debts with a number of creditors find out what professional advice is available locally to help negotiate for you. Debt counselors are experienced in dealing with managing debt unemotionally and practically.