Wherever you are in the cycle of destructive debt, you can take steps now that will make it stop, today. You can work out a debt elimination plan that will help you feel confident and spend smarter. As a widow, to re-build your future…pay off your past.
You cannot fix old debt with new debt. Let me repeat that. You cannot pay off debt with debt. So cross off ideas for using any of the following: credit counseling (including not-for-profits), using home equity to consolidate debt, debt consolidation services, or Credit Repair/FICO Repair kits. The answer is NO, NO, NO.
This article starts with the assumption that you have already learned a few things about the 50/20/30 money formula we use to help you bring your finances into balance. You will have already earmarked 50% (or so) for Core Living Essentials, and another 30% for Embrace Life’s Fun Again. The other 20% of your take-home income is what you will use to pay off your debt.
Here are three strategies to help eliminate debt really, really fast.
Strategy 1: Drain Your Savings Account
When you are a widow and there is a debt problem, you have to be serious about paying off your debt. This means draining your savings account, emptying your checking account, and selling any stocks, bonds, or investments. Liquidate all accounts except your 401(k) or IRA accounts (tax penalties make this too expensive). Crack open Mr. Piggy and look under every cushion in the couch. Keep $1,000 in the bank, and commit everything else to paying off your debts. Don’t worry about the low bank balance, you will start rebuilding it very soon. The $1,000 is the start of your future financial security fund, which you will use to cover any emergencies. This money will keep you from sliding back into the credit card trap when something goes wrong. If you dip into it, you will replace it as soon as possible.
Strategy 2: Tackle Your Debts One at a Time
Many experts suggest first paying off the debt with the highest interest rate. Instead, I suggest picking the smallest balance to pay off first. You get to cross off a debt faster and this feels great! Continue to make minimum payments on all other debts. As you pay off each balance, more money is available to dedicate toward the next debt. This works a little like riding a bike down a hill when you were a young, free-spirited girl. You may need a hard push to get started, but the longer you roll downhill, the faster you will go!
Strategy 3: Pay the Debts That Bother You Most
If you owe any back payments on your rent or mortgage, pay those first to keep a roof over your head. Next, pay any back payments on your car. After that, pay the debt that bothers you most. Perhaps it is an IOU that keeps you from going to a family picnic, or maybe it’s that credit card that keeps dinging you with a $45 over-the-limit fee! Whatever it is – pay that debt down first. Don’t get too caught up on the interest rates being charged. Every debt you pay down is an achievement that will build momentum to make your future brighter and more secure.
Paying off debt can be tough for anyone. As a widow, it is about dedication and love for yourself to get through it. You can! Getting your money into balance, I promise, is the most feel-good step you can take. Knowing you can support yourself and your family, this is what will change your whole outlook and inner-being. It makes each step of recovering from your loss a little lighter. As you pull out of debt and align your finances with your changed circumstances, you are building a firm foundation on which you can begin to rebuild your life. And that is when the real healing can begin.
Any opinions are those of Laura L. Amendola and not necessarily those of RJFS or Raymond James.
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