Reduce Debt, Increase Your Worth

If you have debt from multiple sources, you’ll have to prioritize what to pay first until you get back on your feet. Bucci stresses that with mortgages, once you’re late, it’s very hard to catch up, and you quickly risk going into foreclosure. “You should pay no bill before your mortgage, with the possible exception of your car payment,” he says, noting that many people need a car to keep their job.

As you begin to formulate and use your plan to reduce debt, you should also set aside a small amount for unexpected expenses so that you don’t fall back into old habits. Without an emergency fund, many people have no choice but to revert to credit cards when a medical crisis, home repair or other unexpected issue comes up. By planning ahead, you’ll be able to stick to your goals more easily.

Finding Debt Help

There are many resources available to help you develop new money habits during the first 30 days and beyond. Bucci says people should seek out help in whatever way is right for them. “Some people like to sit one-on-one with a counselor, some enjoy the anonymous support of an online community and others prefer books,” he says.

Bucci recommends credit-counseling (or “debt-repayment”) services, but says it’s important to do research. “Make sure it’s a non-profit,” he says. “And ask if the agency and counselors are accredited by an independent-standards organization.” Bucci says the advantages to using a credit-counseling service are getting a clear picture of the situation and having debt “brought current,” meaning removal of late fees and past-due status.

There’s a big difference between credit-counseling and a “debt-settlement” agency, a service that is heavily advertised on television. Debt-settlement companies have you stop paying your creditors, and communicate with them on your behalf. Meanwhile, you pay a monthly fee to the company. Then, when enough monthly payments have accumulated, they call your creditor and offer to settle your debt. While it may seem like a relief to have creditors off your back, using this option is risky, as the credit-card company may or may not settle, and the debt-settlement agency will have taken a portion of your “savings” as their fee. In addition, you will almost certainly ruin your credit.

To find reputable professional support, check out the US Department of Justice’s web site for a list of approved providers, and don’t rule out personal support as well. Eric turned to Debtors Anonymous for support and found permanent healing. “I was able to share my feelings and admit I had a problem controlling my spending with people who had been through the same experience,” he says.