Bad debt is basically a debt whose payment is not current or which you have stopped making payments altogether. The decision to get yourself out of bad debt is a life changer but thing is that you have to be ready to make the necessary commitment that goes with this change.  It ultimately boils down to changing your current spending habits, knowing who and how much you owe and most importantly, prioritizing paying your debt payment. It also requires that you learn how to budget, sticking to it and ultimately creating emergency and retirement funds. Here are some pointers you can use to get out of bad debt:

Change your spending habits

Spending  habits are unique and real to each individual.  We shop at the same places, eat out in the same restaurants and fuel at the same pumps because it’s comfortable to have a pattern. But if your pattern ends up making you spend more than you have, you might as well forget about getting out of debt. You should endeavor to limit those breakfast dates, carry lunch to work and spend less on food and leisure. You don’t have to eliminate them. You just have to make better choices with what you do.

Create a practical budget

Develop a realistic budget that focuses on your immediate and unavoidable financial needs like housing/rent, food, health care and education. Include your debt payments as part of the budget. Start small and grow with time.  Stop using credit cards and only pay with cash. Look at your monthly expenses to see if you can increase your income to cover some of the bills you have. Think about putting in some overtime, a part-time job or even making money from a passion project or hobby.

Prioritise your debt

If you have a lot of debt it’s definitely a good idea to make paying it off a priority.  However, to make your efforts as effective as possible, you need to pay off your debt in the right way. Start by organising your debt by amounts owed, minimum payments you can make, interest rates and what you have coming in. You can also negotiate rates and payments with the people/companies that you owe to solidify your commitment.

Don’t incur more debt

As tempting as this option might be, it will merely add fuel to the fire. Avoid those lucrative financial institution deals that promise you ‘easy loan top ups’. Incurring more debt is a sure way of entering into debt trap where you borrow to pay other loans.

Change your attitude

Being in debt is a stressful but you must keep it in mind that incurring debt is not a sign of your failure. Strive to grow from the experience. Do not be discouraged by those persistent collection calls you’re getting. Be proactive in explaining your situation and the solutions that you are attempting to use to recover. Always separate your net worth from your self-worth.