This blog post was written by Lauren Compton, Financial Coach at Nivati. You can see more of their content on the Nivati platform and on the Nivati blog. If you want to learn more about Nivati, click here. ‍

Debt traps are all around us. Do any of these sound familiar to you?

• Go to a good school, and don’t worry about the student loans; you will get a great job afterward!  

• You graduated from college and have a job now. You deserve that new car. You just started earning money, so just take out a car loan. You can afford it.

• You're getting married! How exciting! You only get married once. Make memories. Have a big reception and the best catering. Put it on your credit card and earn enough points to pay for your honeymoon!

• You are married now. You are grownups. You shouldn’t rent anymore. Go buy a house. You expect to have kids, so make sure to buy a home with at least four bedrooms. Don’t worry about the cost; the bank can stretch the payments out over 30 years so you can afford the payments.  

Each one of these is a common money trap. They sound good - we want the nicer things in life. But stack a few of these together and, before you know it, you are buried in debt. And not just a little debt. The type of debt that is overwhelming and keeps you up at night. The kind that makes you question your self-worth. Whether you really can afford to have kids or will ever be able to retire. 

The kind that makes you think there is no way out. Ever.

If this describes you, you are not alone. Average household debt continues to climb in the United States. 

The good news is there are many people who take the steps needed to start getting out of debt. Below are three steps that you can start taking today to begin your journey out of debt!

The Situation Is Never as Bad, or as Good, as We Think It Is‍

When household debt reaches a certain point, it becomes overwhelming emotionally and mentally. Feelings of shame, insecurity, and doubt are common for individuals and families that have accumulated a large amount of household debt. Those feelings are rooted in debt, but feelings don’t stay in just one part of our lives. Those feelings end up impacting other aspects of our lives, like work, interpersonal relationships, and hobbies.  

Emotions are not always honest either. Fear can be a helpful emotion to keep us away from physical dangers- like helping us run from a house fire. But fear can also cause paralysis in problem-solving. So seemingly complex problems can APPEAR insurmountable thanks to fear. As a result, we flee from the problem because we feel there is no way to fix it.

When trying to get out of debt, it is helpful to focus on facts. To start focusing on facts, gather all the documents associated with your debts. Credit card statements, mortgages, car loans, that money you borrowed from a family member.  Also, gather all of your income information together.  All of these details will be used in our next step.

Make a Plan‍

Now that you have all of your documents together, it's time to make a plan. The first step is to set your goal. Goals, when buried in debt, can vary. 

• Do you want to pay off all your consumer debt? (car loans, credit cards, payday loans)
• Do you want to pay off all your debt? (includes consumer debt, housing debt)
• Is there certain debt that you wish to retain? (house, car, student loans?)

Once you have decided on a goal: write it down. Whether you like to use a notebook, an app on your phone, or create a Word document, the form doesn’t matter, but putting your goal in writing helps to give you a target to aim for. Your goal may seem big reading it on the page. That’s okay. Take that end goal and break it up into smaller sub-goals.  

For example, if you have a goal to pay off $10,000 of credit card debt but an income of $3,000 a month, it may seem impossible to pay that off.  However, if we break it down to paying off $600 of credit card debt each month, it allows you to make measurable progress each month toward your larger goal.  

Now that you have your goal, the next step is to create your household spending plan (aka a budget). This is helpful when trying to get out of debt because it will help you see on paper how much money goes to your living expenses, savings, and the money available to pay down debt. This tool will also help you begin to start living on you current cash, instead of continuing to use credit cards or pay-as-you-go plans and accumulating more debt. 

Additionally, a spending plan will also help you be more mindful of spending.  Part of your spending plan will be creating categories of upcoming expenses for the month. Planning out expenses will help you stay focused on your larger goal.  This will help you make goal-based decisions. For example, does participating in the annual sale at your favorite store bring you closer or farther from your goal? A spending plan allows you to say yes to your bigger goal throughout the month.  

Staying Motivated on the Journey‍

Large debts may take many months or even years to pay off. It can be discouraging to keep paying on them every month and not fully repaying the debt. It can be helpful to have a visualization of your debt repayment progress. Consider creating a debt repayment chart or temperature gauge that you can update each month to show your progress.  

Taking time to celebrate reaching smaller milestones can also help you stay motivated on the path to debt repayment. Celebrations can include some of your favorite activities or can be a topic of meditation or reflection during your day.

Having an accountability partner through your journey can also help you stay motivated. An accountability partner can also have the added benefit of removing some of the shame associated with having debt. This accountability partner can be a spouse, a trusted friend, or a financial coach. 

No matter where you are right now with your relationship with debt, you can start your journey out of debt today.

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