The 7 Worst Ways To Deal With Big Debts (4 Video Links)
Got debts that you are struggling to pay off? There are quite a few different ways to deal with debt, however not all of them are healthy or effective. Below are just some of the worst ways of dealing with debt (and what you should be doing instead).
Ignoring it and hoping it goes away
This is the most obviously bad way to deal with debt, and yet many people are guilty of it. Ignoring debts will just lead to late payments, angry creditors and eventually legal action being taken against you. Debt will not go away on its own – you’re better off talking to your creditors and confronting it to find a solution.
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Changing your name/address
Some people try to escape their debts by changing their name or address. This is technically fraud and could get you into legal trouble if you get found out. Some creditors will investigate and you may find that it all catches up with you one day. Consult with an attorney before taking any action.
Using scam debt relief programs
There are some illegitimate debt relief programs out there that promise to eliminate your debt in a couple of weeks or even a few days. Don’t fall victim to these scam programs – not only will they not reduce your debts, but many will charge high fees upfront, putting you in further financial trouble. These scam debt relief programs will usually approach you via dodgy emails, texts or robo-calls – do not respond to them.
Dipping into your retirement fund
It’s often possible to access your 401(k) and other retirement funds early. Some people use this money as a way of paying off big debts, however this is not recommended. Accessing these funds early can carry penalties and it can increase your tax bill. It also leaves you with less money to enjoy during your retirement.
Paying them off with high interest loans
Taking out loans to pay off debts is a slippery slope. High interest loans are particularly bad as they can dramatically increase the debts that you owe. A small debt can quickly become a large debt. Eventually you’ll run out of options when it comes to borrowing, and then you’ll have no use but to seek out professional debt relief. Start forward planning now to avoid taking out more loans.
Selling/pawning essential items
Selling items you don’t need to pay off debts can be a good way to reduce your debts, however you shouldn’t be sacrificing things that you do need or things that are of major sentimental value. Even selling/pawning these items puts you in a better financial position, selling them could cause other problems (for example, selling a car that you use to get to work could make it harder to get to your job).
Taking on your debts alone
Many people try to hide the fact that they have debts. This only leads to greater amounts of stress. Don’t be afraid to tell people that you are in debt and get support.
How to actually get out of debt
When it comes to tackling major debts, it’s often best to seek out professional help. There are professionals that can help you negotiate deals with creditors or help you to get your head around bankruptcy law. Don’t be afraid to look into professional debt support.
Be prepared to make big cutbacks to help pay off your debts. At the same time, allow yourself some treats so that life isn’t miserable. If you can find ways to earn more money, this will obviously help too. Don’t be afraid to ask your employer for a pay rise or find a temporary second source of income.
Try to be open with everyone about your debts. Tell your creditors, tell your family and tell your friends. Having the support of other people will make coping with your debts easier as they won’t be talking you into spending money. Consult with a financial advisor and an attorney regarding these important issues.
Ken Boyd
Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies
(amazon author page) amazon.com/author/kenboyd
(email) ken@stltest.net
(website and blog) https://www.accountingaccidentally.com/