It isn’t often that I write about debt… I’m mostly interested in growing my net worth. I’ve also never been in debt (though I’ve been pretty close). However, a well-rounded personal finance website covers should cover getting out of debt. Also, it is good to get out of your comfort zone every now and again.
So let’s pretend that you are in debt. What are you going to do about it?
Typically people are in debt for one of two reasons: they spend too much or they don’t make enough money. If you spend too much that can usually be broken down into two sub categories. I like to call them “big one-time” and “lots of dimes”:
- Big One-Time – If you have McMansion, a Mercedes, or a marine vehicle, you might be in debt because of big one-time purchases. The solution could be as simple as moving to a smaller house in a cheaper neighborhood, selling the Mercedes and buying a Mazda Mazda2, or selling your boat. None of that is fun, but being is debt is also not fun.
- Lots of Dimes – This is the spending of money on many items consistently. These small purchase over a long time add up.
If you spend $10 a day at lunch, that is something to consider. Some may call it The Latte Factor. If you have Netflix, Hulu, MLB.tv, HBOGo, Showtime, and every other subscription service known to man, you might be spending too many dimes.
The one wild-card that I don’t mention here is medical bills. They can be tough, and you really can’t do too much about them, except try to prevent them with good health practices and insurance. Actually that’s not entirely true. You may be able to negotiate them down.
If spending doesn’t appear to be problem, maybe it is your income. If you aren’t making much money, any spending is going to be a problem. You may need to switch jobs, ask for a raise, or start a side gig. I’d love to give you good ideas on side gigs, but my own dog sitting service from DogVacay is doing zilch. I haven’t had one request yet. (Update: I had one request, but it was during a time that I had blacked out as I am going out town. Can’t catch a break.)
There are a few other things you can do that might help:
- Lending Club – If you have decent credit, you may be able to get a loan on Lending Club. You’ll want to make sure that you get a good rate.
- Enlist Some Tools – Ready for Zero is a great tool to get out of debt, but they take their awesomeness to another level by providing a list of competing debt reduction tools.
- Look into Debt Consolidation – You want to look for two things in debt consolidation (such as Trust Deed Scotland). One is to get a better interest rate than what you are currently paying. The other thing is to make sure that you aren’t moving unsecured debt to secured debt. These fancy terms mean that you don’t want to put your house on the line because you overspent on credit cards.
Do you have experience in getting out of debt? Let me know how you did it in the comments below.