This isn’t a trick question and “maybe” isn’t a choice. It requires a yes or a no answer. Okay, so perhaps there actually is a gray area where debt and the interest on your debt are eating up so much of your income it isn’t possible for you to keep up with your current bills.
Now that raises a new question: if you didn’t have so much debt would you be able to live on your current income?
Would you be able to live on less than what you earn? The answer to this question is probably more important than the answer to the original one because if the math shows you could live on your take home pay each month you have an important goal for yourself: reduce or eliminate your debt so you can live on your income.
This may certainly be easier said than done but that doesn’t mean it isn’t possible. Your success will depend on how much and what kind of debt you have. The options available to you also depend upon the type and amount of your debt. Bankruptcy and consumer credit counseling are the major two methods for reducing and eliminating debt. Both have pros and cons and neither helps with student loans.
Ultimately though, living on what you earn (or on less than what you earn) is a very personal choice requiring change and commitment. As with most financial situations this choice must be made daily, weekly and monthly; sometimes even on a minute to minute and hour to hour basis because of the constant peer, retail and consumer pressures and messages which constantly bombard you.
Once the choice and commitment are made the steps to success are obvious. Reducing/eliminating debt requires reducing expenses and/or increasing income. There are specific steps to facilitate this process. These include:
- Creating a Personal Spending and Savings Plan.
- Tracking your spending.
- Changing the habits that cost you too much (lunch or dinner out, Starbucks, impulse and emotional spending, etc.)
- Finding a bank with fewer fees and better service.
- Eliminating the wants in your spending.
Even in these less than perfect economic times there are part-time jobs available during this holiday season that could help you to have more money to put toward debt reduction.
While these represent just a few of the countless methods for working towards living within your means or on less than you earn, they aren’t meant to be tackled all at once. Begin with the one that resonates most with you and then move on to another and then another.
You didn’t build your debt overnight and it won’t disappear overnight, but it will absolutely disappear over time.