Debt Management: Getting Out of the Hole and Into a Better Financial Future

If you are like most middle class North Americans, you have a hefty amount of debt. No longer just for people with less than stellar credit, debt problems have become a modern epidemic.

The reasons for getting into debt may vary, but the result is the same. It doesn't matter of you make $30,000 per year or $200,000: if you spend or borrow more than you take in you're in trouble. It is challenging to invest in your future when you struggle with overwhelming debt.

Maybe you borrowed money for what seemed like a good reason at the time, such as for schooling, or maybe you don;t even remember all the little expenses for which you said 'charge it.' Most of us are better at justifying expenditures to ourselves than we are at abstaining, and it's no surprise given the style of ads we've had soaking into our psyches since we were old enough to watch TV.

Good debt or bad debt?

Perhaps you're even proud of yourself when you pay more than your minimum payments in a given month, but remember this always: your cash outgo is someone else's income, and this puts you on the wrong side of the equation for financial independence. Unless you have invested in assets with your debt and are able to pay off your credit card bills or loans IN FULL each month, you are effectively siphoning your hard-earned, after-tax dollars directly into someone else's pocket. Your initial expenditures will have cost you far more in the long run, a fact which most of us don;t face directly, because it's too painful. Money that, had it been wisely invested in assets, would be earning money FOR you is instead building wealth for some unknown other entity or person.

At some point you may feel overwhelmed and react in an unreasonable but typical fashion: you may begin spending more and more, feeling as if there's no point in reigning in your spending anyway since your mountain of debt is so high. You may begin to miss payments or even consider bankruptcy; these are very normal reactions to the feelings of overwhelm that millions of people feel when deep in debt.

While the above reactions may feel good in the moment, they will have immense negative impact on your credit rating and your ability to make things better in the future. You will compromise your ability to get out of the hole you're in, and it is not necessary. Take heart and be strong; there are many things you can do to take back your financial power and make a positive impact on your financial future.


Take a deep breath and try the following tips as a start.

TIP #1: Your first step should be to contact your banking institutions, and to do so from a standpoint of strength. You are NOT your money situation, and banks want profits, plain and simple. They don't care about you personally, despite all the touchy-feely commercials; they care about the bottom line. Let them know your situation without being upset or needy. Explain what you are prepared to do about it and see what you can negotiate. Ultimately banks and loan companies are better off getting some money from you rather than none. Even if you are considering debt consolidation or bankruptcy, speak with your bank/s first to see what they can do for you. Ask for reduced fees, reduced interest rates and better, more manageable payment plans. Keep your voice calm and your demeanour professional, and try to connect with the person on the other end of the line, so that you can feel on the same team and come up with workable solutions together.

TIP #2: Look into debt counselling, but not until you've spoken to your financial institution. Many credit counselling agencies are out to scam people and leave you with a worse credit rating than when you started. Your bank, friends, accountant and/or attorney may be able to suggest options. Never feel too proud to ask for help; your own financial future is on the line, and no one cares about your money as much as you do. Get it handled, and never look back.

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