It’s easy to put debt on the backburner, assuring yourself you’ll tackle it another day—perhaps when your next paycheck arrives. Pretty soon you’ve built up a significant amount of debt just from going about your life. When you factor in how unexpected expenses tend to crop up at the most inopportune times, it’s not hard to see how debt goes from manageable to alarming very quickly.
There’s also the emotional aspect of debt to consider. It’s stressful to watch outstanding balances climb while increasingly urgent bills roll in. This loop can trigger powerful negative emotions like denial, which prevents even the most well-intentioned people from getting an honest look at their financial health.
When you have money woes, breaking the cycle is not always easy. But it is worth it to gain financial freedom and peace of mind. Here’s a closer look at contributing factors to debt and solutions for addressing debt in a productive manner.
Debt Cycle: The Basics
Debt is cyclical. Once you’re in a debt cycle, it gets increasingly more difficult to extricate yourself. Why? Because costs keep mounting on old debts even while you’re accumulating fresh ones. At its most basic, a debt cycle is “continual borrowing that leads to increased debt, increasing costs, and eventual default.”
Credit card debt in particular becomes especially dangerous when the interest costs become their own expense. In addition to trying to pay off the original amount borrowed, consumers also face growing expenses as a result of high interest rates, often in the 15- to 20-percent range. Another slippery slope emerges when people start relying on balance transfers or additional loans to address their current balances.
Long story short: When you’re trapped in the debt cycle, many “solutions” actually worsen your overall financial health by kicking the can further down the road. For example, paying the minimum balance might buy you more time, but your debt is still mounting in the background. This is why it’s so important to step back, take a look at your comprehensive financial situation and choose a course of action that truly addresses your debt at its core.
Tackling Debts Strategically
How you go about tackling your debt depends on the amount and nature. But knowing that higher interest costs you more, it’s often beneficial to devote extra money to high-interest debts. This will help you devote more of your money to your principal balance and less of your money to steep interest fees over time. Some people can tackle their debt using this strategy plus enacting lifestyle changes to free up more disposable income for paying down debt.
However, many consumers find themselves facing staggering debt. When tightening up your budget isn’t enough, it’s time to explore more heavy-hitting solutions. For example, you may have heard of debt settlement—a process in which consumers partner with a debt relief company to negotiate down the amount owed to creditors. The first step is always conducting research to learn about the process and find a reputable partner. It’s only natural to have questions about various debt relief agencies, like does Freedom Debt Relief work?
In general, the success of any debt relief strategy depends primarily on your willingness to stick with it.
Avoiding Future Debt Cycles
The last piece of the puzzle is avoiding future debt cycles. This likely means changing your relationship to your credit card. Start by only buying on credit what you can pay off in full every month to avoid creeping interest charges. Work on rebuilding your credit score by utilizing credit cards responsibly. Carve out time each month to take a close look at your overall financial standing so you can adjust as you go.
Breaking the cycle of debt is entirely possible. Just remember: Everyone starts somewhere.