Get-out-of-debt gurus too often miss the essential truth known to every carpenter.
Measure twice, cut once
Too many trite lists of tips to help you get out of debt miss the vital first step: understand the situation fully.
How you got into debt
Before you choose a get-out-of-debt path, understand where you’ve come from. Until you know how you got into debt, it’s hard to pick the right strategy to right your economic ship.
- How serious is the problem?
- Has it been building over time?
- Or is it traceable to a particular event?
How urgent is your debt problem
Will small changes in your budget be enough?
- Measure the size of your problem.
- Inventory the tools you have available.
- Know how long you have to get the job done.
Are you mid career, or approaching retirement? Expecting a baby, or presiding over an empty nest?
Look at all options
In light of your assessment, you can then look at all of your options.
Will belt-tightening be enough?
There’s little point in attacking substantial tax debt by cutting out Starbucks. Nor is bankruptcy the right tool for a couple thousand dollars in credit card debt.
Can you shed recurring expenses or increase income?
Are you paying the most important creditors first?
Don’t make bankruptcy the last thing on your list of options.
When you put bankruptcy at the bottom of the list, to be chosen only after everything else has failed, you may spend a lot of time hopelessly floundering. A lot of stress. A lot of cash spent without achieving your goal.
There’s no one-size-fits-all when it comes to debt. Just as there are different kinds of debt, there are different plans to deal with debt.
Whip out your financial tape measure, and check the factors that make a difference here.
Can you just make minimum payments forever?
How bankruptcy changes your life
Bankruptcy is not the last resort