How To Get On Top Of Your Debt

We’re continuing with our Types of Money series, and today is all about debt.

If you missed the last post about savings, you can read all about it here.

Why is debt such an important component of your relationship with money? 

Talking about debt is actually one of my favourite topics because I love helping people break free from the crippling feeling of being in debt.

If you do have some debt, touching on this topic might make you feel a little bit uncomfortable. If it does, it just means it's triggering something within you.

Debt can be this deep dark secret you feel you've got to keep from the world. Like a dark cloud that hangs over you all the time and no matter what you do, you are constantly reminded it’s there.

The silver lining here is that if you can clearly identify a problem, name it, and talk about it in a healthy way, then you're really on the right track to being able to solve it.

Bad Debt Vs Good Debt

You might have come across terms like good debt and bad debt. Bad debt referring to credit card spending, store cards, any form of debt associated with consumer spending as opposed to good debt which tends to be like a home loan, a mortgage that's helping you acquire an asset.

I personally like to put a little bit of a different spin on it. To me, bad debt is any debt that you find crippling. Your home loan can be crippling if you've over-capitalised and you're struggling with your mortgage repayments. If that’s the case, then getting it down to a healthier level is very important.

Practical Exercise

Think about how much debt you actually have. You don't need to know the exact number, but just if you were to guess, how much debt would you say you have? And what's important here is not the actual number that comes up. It's really about the feelings and the thoughts that come up around being in that level of debt.

How does that make you feel? Are there any particular emotions that come up? Does it make you feel sick? Some people can have a really strong reaction to being in debt.

The emotion that comes up the most strongly around debt is usually shame. That tends to be a really strong feeling because we tend to think we never should have got any debt in the first place, and we don't want anyone to know that we've got debt.

The other way to think about this is to try and draw out what you say to yourself about being in debt. One thing you can ask yourself is, what does being in debt say about me? How do I see myself as a result of the fact that I’m in debt?

Pay attention to how you feel while spending money. You might go to spend some money on your credit card and you just get that sick feeling or you just sigh.

The common thread usually is feelings of worthlessness. The problem with all of these thoughts and emotions around debt is that they can actually stop you from getting ahead.

Why Tackling Debt Should Be Your Highest Priority

Of the six different types of money, I would say being in debt is the worst and it's the part of your relationship with money that you'll want to tackle first and really get on top of. Here's how it will hurt you: 

• It'll stop you from saving. Because your excess money will need to go into debt payments.
• It'll reduce your disposable income.
• It'll stop you from achieving your goals because of feelings of worthlessness.
• It can make you feel really bad about spending money.
• If you've got toxic money (stay tuned to see the post on toxic money coming up), it can keep you stuck there as well.

How to Clear Your Debt

There are really two important steps to being able to clear your debt.

The first one, and actually the most important one, is to be able to break free from the trauma and the negative emotions that are associated with debt.

That involves really having some compassion for yourself. Being able to understand that however, it is that you got in debt, that's the situation as it stands, and you don't have to keep beating yourself up about it.

One thing you can do straight away to help settle those emotions is tapping. Find your collar bone point, the one that is a little dip, like a little soft part just underneath your collar bone, and just tap on that gently with two fingers, then you know you can take a deep breath and reflect on the situation.

Give yourself a pep talk and have some compassion. You can say, look, I know I have this debt, it is what it is. I want to become a better money manager. I'm just going to cut myself a break and stop beating myself up and I'm going to start taking some practical steps to solve this problem. But for now I'm just going to accept myself, I'm going to show myself some compassion, and things are going to be okay, I'm going to get through this.

Express any words that feel right to you.

The purpose of the exercise is to settle the intensity of that negative emotion that's running through your nervous system and through your body. That's the first part around being able to start to break free from that negative trauma.

Now the second aspect is to actually take some practical steps to get out of debt.

If you’re using credit cards, you want to really get on top of that, and then you want to be able to put together a debt repayment plan.

Avoid Credit Card Bill Shock

One thing that happens a lot to people when using credit cards, is that they get bill shock.

You’ll be looking at the closing balance saying, WHAT, there's no way I spent that amount of money!

Then you actually look through the credit card statement, and at a glance, you just can't see how those items could possibly add up to the amount that it says you owe.

A great way to get on top of managing that is to actually track all of your credit card expenditure in a spreadsheet.

Being an accountant by background, I love using spreadsheets, and I actually have one that I use to track all of my credit card expenditure every month. This helps me visualise what I’ve spent and how much it adds up to.

It’s a great way to keep track of your spending every month and keeps you accountable.

Within that same spreadsheet, you can also put together a debt repayment plan to dedicate a specific amount that you're going to pay off on your credit cards every month.

Remember to clear your emotional aspect of debt before getting into the practical aspect of it.

But once you start to free yourself from those crippling emotions, then the practical steps will actually translate into some tangible results.

As mentioned above, a spreadsheet is a great tool. If you'd like a copy of my credit card spreadsheet, then just leave me a comment below, and I'll help you get on your way to start getting rid of your debt!

To your success!

p.s. Whenever you're ready to experience a massive money mindset breakthrough, here's how I can help you: 

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To discover how you can clear your money blocks and create a life you love and deserve, check out our free Money Breakthrough training: 
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