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At times, debt can feel crippling and all-consuming, not to mention embarrassing. Still, Americans are taking on debt at record levels. According to Experian data from the first quarter of 2019, U.S. consumers owe $807 billion in credit card debt alone. That's a 6% increase from 2018 and a whopping 29% over the past five years. However, despite their widespread use of credit, consumers often feel guilt and shame when it comes to their debt.
Debt shame, or the humiliation or worry that can accompany carrying a heavy debt burden, can leave people feeling alone when dealing with their money issues. And often, these feelings can lead them to ignore the issue, making the problem worse. Harboring such shame can keep people from communicating with their lenders, refinancing their loans or staying committed to debt repayment plans.
Life should not be an inescapable debt sentence. Here are tips on how to mitigate stress, reduce debt shame and take back control of your personal finances before your debt shame takes control of you.
1. Review Your Finances
To reduce your guilt and shame over your debt and, just as important, start paying it off, you need a plan. Start by making a list of all your debts, including their interest rates, to know where you stand. For a complete list of all your accounts, get your free credit report. It displays what creditors report to the credit bureaus (Experian, TransUnion and Equifax), as well as all of your accounts with balances and the necessary contact information for each. Then, figure out what your minimum monthly payments are to stay current with your debt.
2. Come Up With a Plan
Once you have listed out all your debt, it's time to take steps to minimize it. Create a monthly budget that includes your rent or mortgage, utilities, phone bill, food, gas and other expenses. Compare this with your monthly income to get a better idea of how much you will have left over each month to incrementally pay off your debt. Other steps that will help include:
- Paying your bills on time each month. Sign up for automatic payments or payment reminders so you don't forget to pay your bills. This is the best thing you can do to improve your credit score, as payment history is the biggest factor in determining your score.
- Supplementing your current income. Whether that means asking for a raise, taking on a second job, or utilizing the money your grandparents gave you for your birthday, look for inventive ways to enhance your earnings.
- Finding ways to save money. Cut back on the non-essentials. While going out to eat less and forgoing your annual vacation might not sound fun, every dollar you can put toward your debt counts. Prioritize your finances first and celebrate paying off your debt later.
3. Get Help if You Need It
Sometimes, asking for outside help is the best way to alleviate your stress about money. Talk to financial experts or credit counselors, even people you know personally and trust, for advice about your situation to become as educated as you can about the resources available to you.
Credit counseling agencies can provide you with personalized strategies to manage and lessen your debt, and your friends and family can help give you the necessary support, emotional or otherwise, to feel less alone. If you are having trouble opening up to your partner or spouse about your finances, try following this step-by-step guide on how to do so without hurting your relationship.
Being ashamed of your debt is understandable and quite common. While daunting, it's important to be able to talk honestly about any issues or worries you may have about your finances to get the assistance you need to move forward.
4. Find the Best Way to Deal With Your Debt
After budgeting and discussing possible options, you may still find yourself confused or with fewer funds than you need each month to effectively reduce your debt. If that happens, consider these strategies:
- Debt consolidation. A debt consolidation loan or balance transfer credit card enables you to fuse your higher interest rates into one lower interest debt, decreasing the total amount of interest you will pay overall. Lower interest rates put more money in your pocket, allowing you to put more money toward paying off your debt.
- Negotiating with your lenders. If you have a good credit score and a positive payment history, credit card companies may agree to offer you a lower interest rate, eliminate late fees or reduce your minimum monthly payment. By communicating your needs and advocating for yourself, lenders may be more likely to help you—but you won't know if you don't ask.
- Debt management. Noted above, nonprofit credit counseling agencies can help you come up with a plan for attacking your debt. They may suggest a debt management plan, in which your credit counselor will negotiate with your creditors on your behalf to try to reduce interest rates, fees or even the amount you owe. Once the plan is in place, you'll make payments to the credit counselor, who will in turn pay your creditors.
- Debt settlement. Third-party companies may promise to confer with your creditors on your behalf to curtail your payments—for a fee. Generally, debt settlement firms negotiate to pay your lenders a lump sum that is less than the total you owe. While they do so, which can take months or longer, they'll require you to stop paying your debt. When late payments accumulate and collection agencies start to call, your credit will suffer serious damage. In addition, anytime you pay less than the entirety of your debt, your credit report will show that the account has been settled for less than the full balance owed. While these companies may be able to help in some situations, the potential hit to your credit should make them a last resort.
5. Get Empowered
When you take an active interest in understanding your finances and the ways in which you are personally affected by them, you become your most powerful resource. Remember, finding your way back to good financial standing is a process that doesn't happen overnight. By using the tips outlined above to get your debt under control, you will not only remove the reason you felt debt-shamed in the first place, but you will also feel more confident when handling money, be more likely to maintain good spending habits, and be inspired to reach your financial goals.
Debt shame can feel overwhelming, but only if you let it.