From the likes of Mary Kay to Walt Disney, they all have one thing in common; they had financial problems before they made it. According to the Federal Reserve, the total amount of debt in the U.S. was $4 trillion by the end of 2018. From credit card debt to student debt, all these contribute to being in debt. Debt is one of the causes of depression, among other things. Once you realize you are in debt, accept it. Acceptance helps you deal with the situation clearly without making rushed decisions. Know that it is okay to be in debt; you are not the first. People have filed for bankruptcy before when in the real sense they had other options. Don’t rush into filing bankruptcy before looking for alternatives to overcoming debt.
How do you go about overcoming debt?
1. Prioritize debt
You may have more than credit card debt. The first step to overcoming debt is listing it all. From credit card debt to personal loans, all these have to be paid eventually. Sometimes, you may be in so much debt such that you want to open a savings account, but upon application, it’s impossible because you are in ChexSystems. The confusion on how to get off ChexSystems becomes stressing and knowing that it could potentially affect your credit score makes it even worse. However, even before that, know how much debt you are in.
Sum up all the debt, for example:
Credit card debt 1 $2,000
Credit card debt 2 $4,000
Personal loan $1,000
Total Debt: $7,000
Once you have the whole figure, you can work on how to pay off.
2. Pay the debt
Sometimes, you have an extra source of income or bonuses from work. How about diverting the extra cash towards paying off your debt? Set a monthly payment and do so religiously. For example, if you have targeted to pay the $2,000 debt after you pay off debt 1, maintain the same amount and direct the amount to the rest of the debt. Within no time, you’ll have cleared your debt.
Sometimes, we get into debt because of job loss. Credit card companies have an allowance where you can agree on a specific monthly payment or have a forbearance agreement. Such an arrangement means your account is frozen and the interest rate is a specified amount with no penalties for late payments.
The idea of overcoming debt helps you clear your name and reconstruct your credit report towards building your business empire.
What next after paying the debt?
3. Have a plan
What caused the debt situation? Was it spending patterns, job loss or health issues? The idea is knowing the root cause and changing that. Now that you are out of debt, it is easy to fall back to the same trap. However, having a plan helps you avoid the debt situation again. Probably the plans you had was starting your own business and investing in stocks. Strategize on how to begin actualizing your idea.
4. Work your way up with your business
After paying off your debt, it becomes easier actualizing your business ideas and getting wealth accumulation plans. A company requires finances, and it is only possible when you don’t have debts weighing you down. Financing a business is one of the major contributing factors to its success.
Just as the Bureau of Labor Statistics illustrates, only 50% of businesses survive through their 5th year. With a good debt management plan, it is possible to get your business from the initial stage until it can fully support itself.
A business helps you learn leadership and money management. Your past debt management lessons should apply in your business because you are dealing with suppliers and employees.
5. Retirement, saving and investing
As a small business owner, in the long run, after paying off the debt and building your business, you ought to think about retirement and saving.
How are you working toward your future? To avoid sinking into debt again in the future, lay foundation. Invest in your retirement to secure your future and your family’s. Get a plan that works for you.
An emergency fund is another security. How much do you spend in a month? Save between 3-6 months worth of all your necessary expenses in case your business hits a wall. Finding alternatives of how to prepare yourself and avoid debts is a great way to ensuring you are financially secure.
Consider investment options to watch your wealth grow. The only way to being financially free is by having your money work for you. If it means getting into a real estate business or investing in bonds, do what it takes to have extra income.
Money problems are there and once you know how to handle them makes all the difference. Once you have a way of streamlining them, you can comfortably build your small business into an empire and get returns.
Jess Holmes is a small business owner of Wildish Digital, a digital marketing agency, in Arizona. Her goal is to empower business owners to build their digital empires through SEO & Digital Marketing.