In Part 1, we talked about debt in general, the fact that there's good and bad debt, and that Debt Principle #1 is Don't get into Dumb Debt in the first place!
But it's probably too late for you to follow Principle #1. Principle #2 is "Stop the tide." Principle #3 is "Turn the tide." Really, getting and staying out of Dumb Debt is a cycle, following these steps:
- Stop the tide
- Turn the tide
- Don't get into Dumb Debt again
In that light, we'll talk about stopping the tide. Getting into Dumb Debt begins with earning less than you spend (or, alternatively, spending more than you earn). The only possible outcome of this behavior is getting into debt, and it's usually Dumb Debt.
The key thing to keep in mind at this stage of the game is to stop using your credit cards. Buy only what you can afford. You can only afford whatever cash you have on hand. Once it's gone, it's gone.
You've simply got to stop racking up credit card interest and fees. Turning the tide means paying a little (or a lot) towards repaying your debts, not just paying the interest and fees. I'll show you how to do this in subsequent "Getting Out of Debt" posts. But to turn the tide, you need to stop the tide and this means that your credit card balances must not go up.
For now, you can no longer use your credit cards. Put them away (some people advocate putting them in a cup of water and freezing the cup. I don't. Use self-restraint and if that doesn't work, cut them up). Don't incur any more debt. Pay at least the minimums and don't allow any extra fees to be added to your credit card balances (i.e., don't incur any late or over limit fees).
This is a book I just bought that is an EXCELLENT resource -- a how-to guide if there ever was one -- for getting out of debt. It truly is a playbook.
Check out the FREE mini-course.
Here's a great post showing you what you need to cut out of your spending if you're serious about getting out of debt.
Finally, here's a post I wrote about enhancing your income, called Learning to Earn.
In the next few posts, I'll share some ideas on stopping the tide: Reduce spending, increase earnings, increase your "personal profits," and talk to your creditors.