A few days ago, I made a payment at Verizon Wireless towards my cell phone bill. I didn’t know how much the bill was because I hadn’t been able to bring myself to open it for this month. I knew I was behind, but only had a vague notion of what I owed. I knew this way bad, but it seemed better than knowing at the time.
Anyway, as I punched my phone number into a payment kiosk, I became paranoid that as soon as I hit enter, some alarm would be set off and I would be led away in handcuffs for payment deliquency. I knew it was ludicrous, but I just couldn’t shake the feeling.
The same feeling of dread and immediate apprehension by authorities hits me when I get a phone call from an unrecognized number. I know many people feel a similar dread. I am not the only one avoiding opening mail and answering the phone. Now with creditors even sending friend requests on Facebook to try and get in touch with a debtor, there appears to be nowhere to hide. Once I saw Confessions of a Shopaholic, it was over. I didn’t want to live like that.
The thing is, though, my debt didn’t come from misuse of credit cards, an Adjustable Rate Mortgage (ARM), or a willful disregard for bill paying. My debt came from going to school. I tried to better my employment prospects, but got swept up in the worst recession ever and haven’t been able to pay back loans. After the rent debacle, I fell behind on my utilities. How do you dig yourself out of holes like this, when there aren’t programs to lower student loan debt? It’s like you’re being punished for having what used to be termed “good debt.”
If you’re like me, you’re roulette wheel living–gambling in some way to make ends meet. I have robbed Peter to pay Paul, “put something” on a bill rather than paying the whole thing, taken a cash advance. I’ve had a shut off notice, paid ridiculous late fees, and had to finance a car at a horrible interest rate.
What does any of this have to do with relationships? Everything! You’re debt becomes our debt in a marriage. If you mismanage money when you don’t have any, you will when you do have money. Money is a major factor in why many couples divorce. You may not be considered a suitable mate because of your debt. Even outside of a romantic relationship, your relationships with family and friends can become strained if you are borrowing money or can never afford to go anywhere or do anything. Even if you don’t ask anyone for money, may people will avoid you because they think you might.
Buttake heart! You don’t have to be exiled for your financial sins! Over the past few years, I’ve learned some techniques that have gotten me out of this situation and into better credit before, and having enacted them now, they are working for me once again. Here’s my list of tricks to get you back to zero owed:
1. Know your debt: I had to open the bills. It turns out that many of the bills weren’t as bad as I’d thought they would be, and some were a bit worse. It’s much scarier not knowing how far in the hole you are and waiting on the other shoe to drop than it ever can be to know. After opening bills and checking statements online, obtain a copy of your credit report to see if there are other debts you have that you don’t have record of. Check that information is correct, and contest any bills you believe were paid or any address that you never lived at. Getting your credit report straightened out could take months. When you pay things off, it will take at least a month for those negative items to fall off. You must be patient and persistent in this stage in order to get the results you want.
2. Consolidate what you can. I am working with Direct Loans to consolidate my student loan debt into one monthy payment instead of 4. One loan and one payment means when I pay more than the monthly payment, it will be applied to the principal amount of one loan, which can be more effective than paying more on the individual loans. $100 off the principal of one loan leaves less to charge interest on than $25 on four loan payments.
3.Understand interest rates and late fees. The penalties for late payments are usually late fees (usually at least $5), or costly increases in the interest rate. If you have a service shut off, there are often costly reconnect fees or labor fees to restore services. Not being timely with paymentsnot only hurts you in the present, but in the long run. It’s hard to pay things off when your late payments keep tacking charges on to the bottom line.
4. Downsize spending. This was a hard one for me, because I don’t have a lot of frills or extras. I don’t shop for clothes or shoes, I don’t get my hair or nails done in the salon, and I keep my eating out to a minimum, so I didn’t see a lot of areas to cut. One thing I cut was a gym membership I didn’t use. I cut my toll fees in half by taking the interstate home (yes, I still take the toll to work–don’t want to be late and lose my source of income!). There’s always something you can find to trim a bit, even if you don’t want to.
Now, on to how you pay things off:
5. Pay off one off debts. If you owe a hospital bill, library fine, or other items that are not revolving, try to pay these off first, as they are easier to get finished paying. Try to pay something towards these each month and eventually pay it off. Even $20 towards a $200 bill is something. You may also be able to negotiate to pay the bill off for a lower amount than you owe; this will necessitate answering one of those dreaded phone calls.
6. Pay more than you owe where you can. Any extra on an installment payment than the minimum balance goes directly towards your principal, which decreases the total amount of money you owe over time (except with some student loans, which apply this to the next month’s payment if you don’t otherwise indicate on your payment slip–be sure to check what the terms of repayment are for your bills). This helps you pay off debts faster. On my first car, my payment was $180. The financial person at the dealership suggest I pay $200 a month. That $20 put me on schedule to pay my car off over six months in advance, and saved me a significant amount on interest!
7. Snowball payments. We get used to living off of a certain amount of money, and paying a certain amount of money out for bills. Once you pay off a bill, don’t expand your budget, rather, put that money towards paying off another bill you still owe. This is a technique I call the snowball effect. You start by paying more towards the smallest amount you owe, and when you pay off the smaller bill, you add what you paid a month for that bill to the next smallest bill. Even though you are paying more money towards your debt, you aren’t any worse off, as you’re using money you were used to not having anyway.
These are only tips for eliminating debt, not growing a savings or emergency fund at the same time as eliminating debt. I don’t have any savings yet (bad, I know. I started my 401 K though 😀 ), and don’t have any tips for these, except once you’ve snowballed through your debt, put what used to be payments towards savings. I will let you know how this goes.
Do you have any tips on paying down debt, saving money, improving credit, or otherwise having a healthy relationship with money? Leave them in the comments section.
- Will Making Payment Arrangements Stop Credit Reporting? (brighthub.com)
- 4 Places to Start Your Debt Management Crusade (wisebread.com)
- How to Know If Bankruptcy is Right? (creditrepair.org)
- Trapped By Student Loan Debt, A Family Loses Their Home (education.change.org)