Most people in debt will agree: It’s rough paying chunks of money to chip away at your bills each month. Younger Americans at least have the advantage of years ahead to pay off debt and turn their finances around. Older people may face a harder climb.
Debt equals depression for middle-aged and old
Research published in the Journals of Gerontology: Social Sciences shows unsecured debt load is a good predictor of depression and low self-esteem. While money can’t buy happiness, a lack of money can certainly lead to unhappiness. People with credit card debt often have it due to financial constraints — meaning debt payoff is likely a stretch.
The solution: Pay off the debt. That’s easier said than done, but not impossible. Here are five steps to help you get out of debt and, hopefully, boost your spirit.
» MORE: How to pay off debt
Five steps to debt freedom
1. Understand your debt situation. To get your debt under control, first figure out how much debt you owe and the terms of the debt. It could be worse than you thought — or maybe better.
Pull your credit reports — you can do this for free each year — and look at your open accounts. Write down your creditors, debts, balances and interest rates (which you may need to get from your creditors). Take a deep breath and add your balances to find out how much debt you have.
2. Make a debt payment plan. Opinions vary about the best way to pay off debt. At NerdWallet, we take the mathematically sound approach, which is paying off debt from highest to lowest interest rate.
So list your debts in order from highest interest rate to lowest. The debt at the top of the list will be your top priority for now — meaning you will only make minimum payments on the other debts, while putting most of your money toward the highest-interest debt until it’s gone. Then, you’ll move on to the next one, and so forth, until all of your debt is gone.
3. Increase your debt payments. Of course, if debt were easy to pay off, you wouldn’t have any! If you don’t think you can put any extra money toward debt with your current budget, you need to do one or both of these things: make more or spend less.
Make more: Pick up extra hours at work, get a second (or third) job or turn a hobby into profits. For more ideas, check out this list of 50 legitimate ways to make money part time.
Spend less: Almost everyone can cut back their spending in some way. A few popular options are eating out less often, canceling cable and downsizing your home or car. Also, examine variable expenses like your grocery spending or transportation to see if there’s any room to tighten, and cancel unused subscriptions.
Making more and spending less is only useful if you put the money saved toward paying off your debt. This isn’t the time to reallocate spending from one unnecessary thing to another.
4. Get creative. Especially if you’re elderly, you may not think it’s possible to make more money. And if your expenses are already bare bones, it may be difficult to further cut spending. At this point, it’s important to get creative.
Sell stuff: If you have anything in your home that you don’t use and/or isn’t a family heirloom, you have stuff to sell. List items on eBay or Craigslist, have a garage sale or take your stuff to a local consignment shop.
Barter: To free up a bit of cash, barter for the services you need. Have mechanic skills? Trade them with your tax accountant neighbor to get your taxes done for free! Any marketable skill you have can likely be bartered for services you need. This works best with people, not businesses.
Make or grow things yourself. Instead of buying your produce at the grocery store, plant a garden. Instead of buying cleaning products, make them yourself. Do-it-yourself works for many things — just Google “DIY [insert product here]”.
5. Consider alternate options. If your financial situation is truly dire, you may have to get help. This could be from a family member who’s willing to give you money to wipe out all or part of your debt, or it could be bankruptcy. These options may not seem ideal, but there are few things worse than living with depression every day.
Asking for help is a sign of maturity, not weakness, provided you handle your finances in the most responsible way possible after help is given. If this is the only way to get out of debt, do it.
Depression or debt is bad enough on its own. Together, they can be devastating. If you have debt that’s causing clinical depression, or even just a feeling of general glumness, use these five steps to get it paid off once and for all. And then, enjoy your debt freedom!
Sad woman image via Shutterstock