7-Step Guide to Getting Out of Financial Debt

Financial debt, particularly when it has accumulated to a significant degree, can be a serious problem for any individual. It can lead to situations wherein a person feels unable to pay for their own needs, those of others, and to ultimately move an enjoyable life.

Additionally, deep financial debt can often feel like an impossible obstacle to overcome. It may cause a person to feel lost as to how to get themselves out of debt and prevent themself from returning back into the same trap.

In this guide, learn about the process of getting out debt regardless of how large it is. Take a look in the sections below to get on the path to financial freedom.

Step 1: Stop feeling anxious about the situation

Large debt can make a person feel powerless to change and improve their situation. However, this is not a good mindset to be in as it prevents them from taking full control. It’s important that the right mental approach is achieved and maintained throughout the process so that rational decisions can be made and carried out.

Step 2: Make a detailed accounting of the debt

A firm grasp on the size of the debt is crucial to moving forward. This means that the debt has to be calculated in full, including any interest rates and additional fees that may have been incurred. In addition to this, a breakdown of the different sources of debt will also be needed, as well as any other expenses that must also be addressed. These allow a person to paint a complete picture of their financial obligations.

Step 3: Evaluate the current financial situation

After the debt has been thoroughly accounted for, the next step is to look at the assets that can be used towards paying off the debt. These will include several factors such as a person’s income, properties under their name, and other similar resources. In doing so, a person can begin building a budget that they can follow.

Step 4: Prioritize which debts to pay off first

If there are multiple sources of debt—which is likely to be the case for many individuals—it’s important to compare the importance of each debt so that a realistic plan of payment can be achieved. Begin by prioritizing the most important obligations such as home mortgage payments and loans from financial institutions. It’s also possible to prioritize by the rate of interest and pay off the debts with the highest rates first.

Step 5: Negotiate with creditors

It’s critical that a person proactively reaches out to their creditors to achieve several conditions. These include a) that the creditor is aware of the financial situation of the person, b) that the creditor knows the person is attempting to pay off the debt, c) that an agreement with reasonable terms can be reached by both parties.

Step 6: Minimize unnecessary spending

This is a crucial step that will arguably represent the toughest decisions throughout the process. A person who wishes to get out of debt has to move away from the lifestyle that put them in debt in the first place. This means that frivolous expenses have to be avoided completely, and a focus on the absolute essentials is kept.

Step 7: Gradually pay off the debt

This final step of the process involves making a payment schedule in accordance with any agreement established in the prior steps. It’s important that adherence to this schedule and its underlying terms is maintained. The goal is to slowly pay off the debt while still providing for all the necessities of the debtor. Over time, this may become easier to manage as the debt becomes continually smaller.

Conclusion

This process can apply to any type of debt regardless of its source or scale. Remember: debt is a problem that can only be overcome with diligence and a thoughtful plan of action.

DebtHelpers.ca offers professional assistance for individuals in Canada seeking debt relief. Interested parties can visit the website contact page to schedule a free consultation today.