5 Important First Steps To Take If Your Debt Feels Too Big To Manage

Couple managing the debt.
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For most people, debt is inevitable. Your mortgage is a debt. Your car loan. Your student loan.

According to credit-reporting bureau Equifax, we can consider those, in most cases, examples of “good debt” because they can help us to grow wealth. Home values will increase, making us money. Student loans pay for our educations, which will lead to better career options and bigger paydays. And that car gets us to school or work.

Then there’s the “bad debt” – credit cards and high-interest loans that you aren’t able to repay. And when the debt grows to way bigger than your paycheck can handle, the debt can seem unmanageable. It’s time to take action.

But where to start? By looking at your debt not as one huge number but as a collection of smaller payments that are achievable to make.

“It is easy to feel overwhelmed when you look at the big picture of things, like how much total debt you owe,” said Jake Hill, the CEO of DebtHammer. “A concept learned while playing sports as a kid was to avoid focusing on how many points you have to make to win, especially if your team is way behind. Instead, focus on the next point at hand, and then the next and so on. This helps prevent you from feeling overwhelmed by focusing on the here and now.”

Building Wealth

“I found that this concept applies to tackling debt as well. Instead of stressing over the entire amount that you owe, focus on your next payment, and then the next, and so on. Breaking it down into smaller chunks can make it feel much more manageable.”

But that change of attitude is just the start of dealing with your debt.

Read: 10 Ways To Bounce Back From a Heavy Spending Month on Your Credit Card
See: What Not To Do While Trying To Get Out of Debt

Figure Out Just What You Owe

If you’ve been setting aside those bills, knowing you can’t pay them, it’s time to open the envelopes, gather your statements and review them.

Adem Selita, the CEO and co-founder of The Debt Relief Co., recommends putting everything down on paper or a spreadsheet to see just where you stand.

When your debt gets to the point that you feel like you’re making payments with no insight into where they’re going and whether they’re actually making a dent on your balances, you need to analyze your accounts one by one and put everything down on paper,” Selita said. “Your main priority should be to analyze and understand your current situation. Realistically speaking, if you don’t understand your situation, you’ll never be able to manage it better.”

Building Wealth

Organize your debts by due date, too, so that your payments won’t be late.

Audit Your Spending

Now that you know what you owe, it’s time to figure out where you can find the money to start making payments.

“Do a spending audit,” said Steffa Mantilla, a certified financial education instructor and founder of the personal finance website Money Tamer. “In this audit, you’ll need to create a bare-bones budget of all your monthly expenses. For the debts you have, list their minimum monthly payment amounts as well.”

“Once you have this information, compare it to your actual monthly spending. You may find that you’re spending way too much money on eating out and entertainment when it really should be going towards paying off debt.”

Negotiate New Payment Terms

Mantilla, who said she and her husband paid off $80,000 in debt in five years, said if your spending audit shows you just don’t have enough money to pay your debts, it’s time to try to negotiate new payment terms.

Start calling each debt account to see if they offer temporary deferral or the ability to temporarily pause payments due to hardship,” she said. “This will keep you current on all your bills but give you the wiggle room to pay off some of your smaller debts first. If you’re able to get a debt payment paused, put all the money you were going to pay on that debt towards the smallest debt. You want to take advantage of this grace period to pay off as many debts as you can. That way when the deferral ends, you’ll now have the cash in your budget to pay toward them.”

She cautioned you need to exercise discipline, too.

“This method is a good way of preventing your debts from going to collections. But you have to stick with the plan. If you instead spend the freed-up money on consumer goods instead of paying off debt, you’ll be in a far worse situation once the debt payments start up again.”

Find Out: 17 Biggest Budgeting Mistakes You’re Making

Keep Your Focus

Many people get overwhelmed by personal finances because there are so many things to focus on — paying off credit cards, student loans, saving for retirement, buying a house, etc.,” said Brian Walsh, a senior manager and certified financial planner at SoFi. “People want to feel like they are making progress, so they spread their focus and resources across all of these goals. This may seem logical, but it is the exact opposite of what we recommend. By focusing on one goal at a time, you will make progress quicker, and progress leads to persistence.”

Find Out: Why You Should Start Budgeting Now for 2022

Engage a Support Person

Sha’Kreshia Terrell, a personal finance educator with Humble Hustle Finance, had one final tip: take someone on the journey toward getting out of debt with you.

“Having an accountability partner can lighten the load times 10. They can help you keep in mind the vision of a debt-free life when times get hard,” she said. “The vision of you living a debt-free reality is motivating to the human mind. … Don’t forget to include you accountability partner in every step of the way.”

Remember paying off your debt is a marathon. The debt didn’t grow overnight, and it won’t get paid off instantly, either. Following these tips can help you to achieve a debt-free future.

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Last updated: Nov. 1, 2021

About the Author

Jami Farkas holds a communications degree from California State University, Fullerton, and has worked as a reporter or editor at daily newspapers in all four corners of the United States. She brings to GOBankingRates experience as a sports editor, business editor, religion editor, digital editor — and more. With a passion for real estate, she passed the real estate licensing exam in her state and is still weighing whether to take the plunge into selling homes — or just writing about selling homes.

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