5 Tips for Getting Out of Debt
A lot of people set the goal every year of getting out of debt, but they don't all succeed. Sometimes after a failed attempt or a wrong turn in their financial planning, people will end up in our office asking to do a bankruptcy.
Bankruptcy can help a lot of people, but depending on your situation, there are other options to help you get out of debt. Here are a few tips for getting started:
Get Everyone Involved
To succeed in your financial goals, everyone in the family has to agree it's a priority. Talk with your spouse and make sure he or she is on board. Let your kids know about the goal and help them figure out a way they can help.
If your husband or wife is unwilling to help or make the necessary sacrifices, you can talk with a financial advisor about separating your debt from your spouse's. That way at least you can get some of your family's debts taken care of, and in the process you might inspire your spouse.
Budget, Budget Budget
Budgets are crucial if you want to get control of your finances. Not only do they help you keep track of your spending so you don't buy things you can't afford; they also help you prioritize your spending so you focus on the payments you want and need to make the most.
There are a number of ways to create a good budget, including many free resources available online:
- Mint.com is one of the most popular systems. It syncs your bank and credit card accounts, helps you categorize each receipt, and keeps track of your savings, investments, and goals.
- EEBA uses the old-fashioned envelope system, where you put a certain amount of cash in envelopes set aside for specific costs.
- You can also create your own budget, like the one used here.
Get Help, But Don't Wait Till the Last Minute
A lot of people want to take the easy way out on finances, so they'll apply for loan modifications or try credit counseling. Both of these options can make a big difference, but they don't work for everyone.
Loan modifications fall through all the time, and credit counselors may not be able to help with huge debts. If you're facing foreclosure or are deeply in debt, don't depend on these options alone. Seek help from a qualified attorney who can help put a legal and binding stop to things like foreclosure, wage garnishment, and car repossession.
Prioritize Certain Debts
If you have a lot of different debts, make sure to pay certain ones first. IRS debt is often ineligible for discharge through bankruptcy; and the federal government can come after you and your assets if you don't pay. Similarly, student loans can't be handled through bankruptcy, either, so paying those down is always wise.
In addition to tax and student debt, you may also want to pay off small debts at the beginning of your debt-free journey. It can help you feel more confident and build momentum to get used to the feeling of paying off a debt, even if it's not a big one. Just keep in mind that leaving larger debts for later will mean you accrue additional interest.
Don't Discount Bankruptcy
A lot of people who come in to see our attorneys have tried every trick in the book before they come to us. Sometimes they see bankruptcy as shameful or wrong. But bankruptcy is a valid option for people who have no feasable way to pay off their debts.
Perhaps you've lost your job or face sudden medical bills. Perhaps your spending has gotten so out of control that your income couldn't possibly cover what you owe. Perhaps you're so behind on your mortgage that you could lose your house before you ever start getting your payments back on track.
In these situations, bankruptcy can be a life-saver.
Figure Out Your Options
If you want to get out of debt but feel like it's an impossible goal, we would be happy to talk through your options with you. We can let you know if bankruptcy would help; and we'd be glad to guide you through rebuilding your credit after bankruptcy.
Call us today at 816-842-6200 to speak with an attorney. Or you can email us and schedule your free consultation.
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