If you’re so deep in debt you feel as if you’d fallen into the Marianas Trench, you’re probably experiencing a great deal of stress. And as the old saying goes, stress kills. This may be a bit over the top, but the stress related to coping with a mountain of debt can definitely cause physical symptoms including.
- Muscle pain
- Chest pains
- Changes in your sex drive
- InsomniaLack of focus or motivation
- Anger or irritability
- Depression or sadness
- Under- or over-eating
- Alcohol or drug abuse
- Social withdrawal
Why this happens
This basically goes back to our old fight or flight syndrome. When we are feeling stressed, our nervous system releases a flood of stress hormones including cortisol and adrenaline. These prompt your body for emergency action. Your muscles tighten, your heart pounds faster, your blood pressure rises and your senses become sharper. In short, it’s your body’s way of protecting you. When stress is working the way it should, it can help you stay energetic, alert and focused. If you find yourself in an emergency situation, stress can even save your life. However, if it gets beyond a certain point, it can stop being helpful and start causing you to suffer major damage to your health, your productivity, your mood, your relationships – in short your quality of life.
Tips for dealing with debt
There are a number of ways you could deal with your debts to relieve your stress and feel better about your life. Here are some of the most popular steps you could take.
1. Get a debt consolidation loan
Use the money to pay off your other debts. If you could qualify for a secured loan, you would probably get an interest rate of around 5% or better, which would translate into much lower monthly payments. Plus you would have only one payment a month to remember.
2. Find a consumer credit counseling agency
These agencies have counselors that are very skilled at analyzing your finances – including both your earnings and your spending – and helping you develop a debt management plan. Your counselor will help you create a budget to better manage your finances and present your debt management plan to your creditors for approval. Assuming they all accept your plan, you would be relieved from the stress of having to pay them. Instead, you would simply send the credit counseling agency one check a month and it would pay your creditors. Again, that one payment should be less than the sum of the monthly payments you’ve been making because your counselor will most likely be able to negotiate reductions in your interest rates.
3. Negotiate with your creditors
Make a list of your creditors with their phone numbers. Call each one and ask to talk with a customer service representative. Explain to that person why you’re having financial problems and then try to negotiate more favorable terms – a reduction in your interest rate, a suspension of payments for several months and so forth.
4. Settle your debts
Instead of negotiating with your creditors for better terms, contact them and attempt to settle your debts. This works only if you are about six months in arrears in your payments because few creditors are willing to discuss settlements unless you’re that far behind. If so, you could offer to settle for say 40% or 50% of what you owe. You will need to be a good negotiator to pull this off and will need to have the cash in hand to pay any settlements you are able to negotiate. If you’d like to know more about settling your debts with credit card companies be sure to watch this video.
5. Borrow from your retirement fund
If you have a 401(k) or an IRA, you should be able to borrow from it and use the money to zero out your debts. Be aware that if you borrow from a 401(k) you will need to pay back the money within five years. If you don’t the money you withdrew will be treated as ordinary income and you may be taxed accordingly. The best part of borrowing from your retirement fund is that you’re paying back the money to yourself as well as the interest you will be charged. The downside is that any money you take out of your retirement account won’t be growing in value, which will cause you to have less money when you’re ready to retire.
6. Get a second job.
If you’re in a position where you could take on extra shifts where you work or get a second job, you could use the money to pay down your debts. Depending on your circumstances, this might be the fastest way to get out of debt and eliminate all that stress that’s making your life miserable.
7. Snowball your debts
This is a strategy that was developed by the financial advisor, Dave Ramsey. The way this works is that you order your debts from the one with the highest interest rate down to the one with the lowest. You then focus on paying off the debt with the highest interest rate, as this will save you the most money. When you’ve paid it off, you move on to the debt with the next highest interest rate and so on. If you use this strategy, you might be able to zero out as much as $50,000 in debts in less than three years. And, just as important, you will have your debts under control, can see that you’re making progress towards paying them off and should feel much less stress.
This might be the fastest way to achieve stress relief because you should be able to get through a chapter 7 bankruptcy in six months or less. It can be a good solution if most of your debts are unsecured debts such as credit card debts, medical bills or personal loans. You could probably get an attorney to handle your bankruptcy for $500 or less. If you don’t own a home, you could do the bankruptcy yourself – for free. However, be sure to understand that there are some unsecured debts that a chapter 7 bankruptcy won’t discharge including student loan debts, alimony and child support. It also won’t discharge secured debts such as auto loans and mortgages. Plus, This `will put a black stain on your credit report that will last as long as 10 years