Debt Spirals... UGH!
A debt spiral is pretty much like a bad nightmare where you’re falling into nothingness and can’t get yourself out of it. Many people go through at least one debt spiral in their lifetime because of unexpected expenses, loss of a job, or a medical crisis.
Sometimes it’s not your fault that the debt spiral occurs. Other times it’s because your spending habits were out of control. Whatever the reason you find yourself in a debt spiral, it’s time to spend less, make more money – or both.
You're Doing A Financial Freefall... Now What?
It may take a while to unravel the tangled mess you find yourself in, but you’re sure to learn more about how to better manage your money and a little bit about yourself, too. The first thing to do if you find yourself deep in debt is to assess your damage.
How much do you owe, who do you owe it to, and what interest rates are you paying on each account? You should assess ALL of your debts, but especially focus on consumer debts such as credit cards.
After assessing the damage, you'll need to start analyzing the root cause of your financial problems. That can only be done by tracking your spending. You’ll then begin to understand the weak spots of your spending habits and be able to focus on areas where you can cut back.
Debit and credit card expenditures are easy to track. If you use cash, you'll need to save and add up receipts. Keep a small notebook with you to track purchases that don't offer receipts, like getting a soda from a vending machine.
Time To Gather The Family For A Budget Meeting
After you know where your money is going, you can include the entire family in your plan to cut back.
Don’t cut out everything that the family enjoys, but do include them in the effort to trim some of the fat from your spending habits. If you need more help than a budget plan to cut back on expenses, consider a consolidation loan to reduce your multiple payments to one and to stop the high interest rate you may be experiencing on credit cards.
Being unable to make payments to creditors on time can ruin your credit standing and even lead to harsher measures such as bankruptcy. One signal that you’re in a debt spiral is that you can’t afford to pay your credit cards in full each month.
You keep using your credit cards to purchase necessities, such as food and medicine. In the meantime, the creditors add an ungodly amount of interest to the balance each month. You may even borrow to pay bills – a sure sign you need to sit down and carefully assess your spending and what got you in this predicament in the first place.
Don’t assume that the road will be smooth after you get yourself out of the debt spiral. You have to get to the root of the problem and take steps to keep you from ever having this problem again.
Are you currently in a debt spiral? What are you doing to dig yourself out?