Finding yourself in a position where you don’t have enough cash to pay your debts is never fun. But don’t let it destroy your self-esteem. Acknowledge that you made a mistake, and make it your goal to not only rectify the error, but to learn from it.

Objective:

Put measures in place to pay off debt.

What to Do:

You have many choices in dealing with debt. One of your first decisions should be to stop racking up additional balances. Each time you avoid an expensive restaurant meal or any unnecessary purchase, pat yourself on the back for using self-control. We are quick to blame ourselves for mistakes, but slow to give praise when we make good decisions.

Next, do the hardest thing. Tally up everything you owe. It’s scary, but you can’t make informed decisions without understanding the big picture. Take everything into account – credit cards, student loans, car payments, medical bills – everything.

Refer back to the budget you created. You’ve already determined your income and your fixed expenses (mortgage/rent, utilities, etc.) How much do you have left each month that can be used to address debt? Come up with a number.

Now examine your debts. Compare the balances, interest rates, and penalties. It may sound counter-intuitive, but start with your smallest debt first. Set a goal to pay it off – then execute. Once you meet that goal, celebrate! Reward yourself in a small way, and acknowledge your accomplishment. Now move on to the next smallest debt, and repeat the process.

In the meanwhile, look at ways to handle your larger debts. Can you transfer high rate credit card balances to a lower rate card, or even to a 0% promotional card? Can you set up an alternate payment plan with a creditor if you are unable to pay the minimum balance each month? The worst thing you can do is to ignore these debts. They don’t go away. Creditors are far more likely to work with you when you demonstrate that you are attempting to honor your debt instead of avoiding it.

If necessary, consult with a professional. Visit the National Student Loan Data System (nslds.ed.gov) to get specifics about the terms of your loan. Take advantage of free services such as Credit.com, which will give you a detailed report about your credit usage and spotlight areas that need improvement. If you still feel overwhelmed, meet with a Certified Financial Counselor. This is a free service provided to Achieva members aimed at helping members manage and overcome their debt obligations. They will provide education and help map out a specific debt management plan at no charge.

Dealing with debt can be scary, but you don’t have to do it alone. When you demonstrate that you are willing to fulfill your obligations, creditors are usually willing to help. Working with an accredited counselor is another great way to go, and they can provide the reassurance that you may be lacking. So don’t procrastinate any longer – tackle that debt!