Too Much Debt

Dear Positive Way Money Consultants, my husband and I are separated at this time because of money issues and stepchildren issues.  I have a hard time controlling money and I am behind on all of my bills.  What is your suggestion as to how I should go about paying off my debt?  Most of my debt is secured, so I can not file bankruptcy.  Signed Coop28, 37, Too much debt.

Dear Coop28, I am sorry to hear that you are having such issues that they have lead to a separation from your husband.  Trying to support two households instead of one is often much more expensive and makes the financial problems worse.  Please consider the following:

How to get out of debt now:

1. You ask how to go about paying off your debt.  Since you are behind on all of your bills the first step is to get current with every lender.  Either pay them up to date or negotiate a new payment schedule that you can absolutely comply with.  Some companies will reschedule payments and even waive some of the fees if you ask and commit to making good on your debt.  As far as paying off debt, the best approach is usually to concentrate on paying off the highest interest rate debt first.  That is usually credit card debt but it could be payday loans or other high-fee high-cost debt.  Make a list of your debt including how much you owe, the payment plan and the interest cost.  Match that against your cash income, your expenses and your ability to pay.  Then pay as much as you can to eliminate the high cost debt as quickly as possible while keeping all other debt current. There are other ways to find the cash reduce debt. 

2. If the debt is for a car, house, boat or other physical asset, sell the asset and use the proceeds to pay off the debt.  Buy a cheaper used car, rent a smaller apartment and don’t replace expensive toys.

3. Increase your income by changing jobs, working overtime or taking on a second job.  See our article on increasing income.

4. Reduce your expenses.  You write that you have a hard time controlling money.  Unless you are working from a carefully prepared and monitored monthly budget, you are probably leaking money in places that you aren’t even aware of.  A few dollars here and a few dollars there can really add up.  Spend some time with our money saving ideas and use every one you can.

5. As you are finding, controlling money can be difficult and this is especially true when you are under stress.  It is often easier to spend rather than to do the work necessary to not spend.  But at the same time you probably realize that the price of not paying attention to your money can be very high.  It’s time for you to get control.  Read our articles on being financially responsible and seven money mistakes.  Then follow the Seven Quick Steps to Financial Freedom to get control.  None of this is rocket science but it will take work on your part.  You will have to face the facts about your current money habits and make necessary changes. 

6. Everything you know about debt may be wrong. Learn how to really get out of debt.

You are to be commended for realizing you have a problem and wanting to change.  We wish you the best.  Please remember that you are in control of your life.  None of this information should be considered a substitute for medical, financial or legal advice.