Many people find themselves in some degree of financial difficulty. Whether it be economic recession, bad investments or just an inability to find a job due to lack of experience… you name it, financial difficulty can come suddenly and from a large variety of sources.

The Solution To Bad Debt

The most important thing is not to panic as it will only make things worse. After that, try to identify the root of the problem and plan some way out of it. But be honest. Just by analysing everything you will be making a start on the path of regaining financial security. We’ve explored overcoming bad debt step by step below:

What is the Real Problem?

While this determination is quite obvious, many people might have a problem with this particular step. Look hard at your purchases and other expenses. You might have been living beyond your means. This problem is quite common considering how easy it is to acquire a new credit card when you have maxed out another one.

First of all, you do not have to tackle everything at once. You need to prioritise. Pay off the most pressing of your debts. Your burden will be a lot lighter once you cross a debt off your list.

Analyse Your Debts

Not one financial difficulty is the same. The best thing to do is to make a list of all your debts and categorise them by amount and urgency of payment. Next, try to contact your credit card company and any other creditors you might have and make a plan that will work for everyone. Remember, companies prefer to get paid and they will give you more time. Most of them will try to avoid any legal action if they see you are willing to solve the current situation. If you file for bankruptcy, they will receive nothing, so keep that in mind when negotiating.

A Budget is the Foundation

Making a solid and realistic budget will allow you to live well, pay all your monthly bills, and put the remaining money towards paying your debts. The best way is to forget all about your credit cards, no matter how appealing they might be. A debit card, regularly checked, will allow you to see exactly how much you are spending. Needless to say there will be no more expensive purchases in the foreseeable future. Make another list with everything you regularly spend money on. Whether you eat lunch at an expensive restaurant every single day or go on short, exciting trips during weekends, these kinds of expenses need to stop.

Once you reduce the most outrageous expenses, you will see a shift for the better in the amount of money you spend every month. After this, you can start cutting out other things that are not necessary to your wellbeing. Do you own an expensive satellite TV package but are hardly ever using it? Do you regularly pay a gym membership but never exercise? Now is the time to cut back on all of this.

Mindfulness is the key to a debt free life!