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Debt is painful.

There can be no doubt, besides maybe the loss of a loved one or the death of a friend, that facing bad debt can be a traumatic experience that a large number of people face in their life. I did.

But the secrets to digging your way out of debt are logical and not too difficult to apply, as long as you are aware of what to do.

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Debt, especially problem debt, can easily lead to depression, hopelessness, the inability to create a plan on how to deal with the debt, and frankly, just plain giving up. In my experience, people facing problem debt fall into one of three big buckets.

  1. Can’t Face It: They can’t face the reality of the situation and shut down, letting the situation just roll right over them.
  2. Accept at Face Value: These folks just make minimum payments and go along with whatever the situation is, not looking for a way out—but not falling further behind.
  3. Taking Action and Taking Charge: These people actively search for solutions and actions they can take to deal with the debt situation and make things better.

It’s tough to face the perceived shame and fear when you are looking for answers on how to get out of debt. Most people have not lived in that place in life and don’t fit squarely in any of those three buckets above. The most common scenario is for them to have one foot in one bucket, and one foot in another. For example, they may want to take charge but can’t face it. These people are most likely to run out and look for the first quick fix they can find and then latch on to it, regardless of whether or not the solution is appropriate for their situation.

[Resource: 11 Ways A Debt Collector May Be Breaking the Law]

This amalgamation of underlying characteristics leaves people taking action but not researching the best solutions, and that can make the problem even worse. One example is the new “debt restructuring” solution being marketed to consumers as some sort of magic wand. For more information on debt restructure and how it is being sold to consumers, see Consumer Debt Restructuring 101: What It is and Why You Should Avoid It.

There is an almost endless series of gimmicks, tricks, and tips that are sold to consumers for big price tags and proclaimed to make the debt magically disappear. While that sounds wonderful and miraculous, the reality is that debt is best resolved by a combination of simple steps and actions:

  • Increase Income: Income can be increased by earning more money. A second job or more hours might be possible. Even adding income by someone else in the home getting a job can improve the overall household income.
  • Reducing Expenses: There are two ways to reduce expenses. One is to cut out a service completely and another is to be a smarter consumer. Couponing, for example, is a great way to spend less on food and reduce your outgoing expenditures. As Benjamin Franklin said, “A penny saved is a penny earned.”
  • A Combination of the Both: Rather than focusing all efforts on one approach, a combination of both saving money and making money is the most effective way to get out of debt. However, it’s important to leave room for fun on your way out of debt. If we don’t make room to live a life that has some allowance for fun and enjoyment, we simply are never going to reach the finish line of getting out of debt.

Once you’ve made the decision to get out of debt the next step is to take a deep breathe and relax.

Yes, the situation is unfortunate, but you can’t make any initial rash decisions or you’ll make some costly mistakes by thinking with your emotional brain.

My advice is for you to seek help and get advice from an expert. In fact, I would suggest anyone facing problem debt to visit me at how to get out of debt. I don’t sell any programs or services. I just answer consumer questions on what to do to so that those dealing with bad debt can begin to put that debt behind them.

The next critical tip is to keep an open mind and not prejudge a solution that may help you deal with the debt. I’m specifically talking about considering the fresh start, second chance program to help you legally deal with bad debt— bankruptcy.

[Resource: Bankruptcy Survival Guide]

The initial reaction people have about bankruptcy is that it is somehow unethical or wrong. That’s not true. It is, in fact, the only legal way to restructure your debt to fit your income situation. If bankruptcy is seen as a positive sign when companies in trouble seek its protection, why do individuals discount it?

The best approach on how to effectively deal with problem debt is clear. Time has shown me that to put problem debt behind you effectively you must:

  1. Recognize you are facing a financial situation that is beyond your income;
  2. Take action to deal with the debt and get your life to fit within your income;
  3. Make adjustments when necessary to reduce your outgo so that it is less than your income, plus any amount saved each month in case of emergency; and,
  4. Consider all forms of intervention logically, not emotionally.

If you follow these steps you will find relief faster than someone that is struggling with the five stages of debt on their own. What are the five stages of debt? Watch the clip and see if you recognize any of them:


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