Do you have the “debt monkey” hanging on your back?

I did, several times, and it’s one of the worst feelings. It can feel like a few tons of solid monkey meat (no offense to the monkeys), hanging on for dear life. But I’ve learned a few tricks along the way, and they’ve helped me to get completely out of consumer debt with as little stress as possible. So I’d like to share them with you here.

Get Online Banking With Bill Pay

If you can manage your monthly payments, but the stress of having the debt feels like it’s killing you, the first thing you’ll want to do is get all of your payments into an automatic online bill pay program. I used to sit there once a month, and drink an entire bottle of wine while I paid my bills, which included a good dozen that were just for my credit cards. And ALL of them had four- or five-digit balances. More wine, anyone?

When online bill payment became available, it was like manna from heaven! It took a huge load off of my mind because I no longer had to wince in pain every time I wrote a check or looked at the statement balances.

Caveat #1: If you use online banking for bill payment, make sure you can cover your payments! Or at the very least, ensure you have sufficient overdraft protection in case your account becomes overdrawn.

With this technique I’m suggesting one way that you can help to get the debt out of sight, out of mind. So if you’re not physically writing out a check every month, it can easily slip your mind to make sure that you have sufficient funds to cover the payments.

Caveat #2: Make sure that you increase the payment on any cards which you have used in the previous month. Minimum payments will go up, and even if you’re two dollars short of the minimum, you can get slapped with a $29+ late fee.

One way to avoid this problem is to use only one credit card on a regular basis, but only if you must. Then you only have one minimum payment you will need to check each month, and the rest of them will just decrease over time. Easy!

When I was finally in a position where I didn’t have to charge things anymore, I used either a debit card or my American Express. This meant that either the money was immediately deducted from my checking account, or I had to pay off the entire balance every month. If you can possibly manage to avoid using all credit cards, and just stick to your debit card for credit card purchases, that would be most preferable.

By automating your bill payment process, you’ve also saved yourself some time in your To Do list. It’s also very convenient for monthly payment amounts that never change, such as your mortgage, cable, or trash removal bills.

If you don’t have a bank account, and want to open one, do a little research first. Try to get an account with a bank that offers free online bill pay service – keep in mind that some banks charge a monthly fee. Of course this doesn’t make sense, because they actually save money by sending it electronically to most of the merchants.

Also be sure to ask how many merchants they have agreements with, to which they can send money electronically. We use two different banks, and the difference between their bill pay services is huge. (Citibank’s online service is excellent.)

Some merchants will only accept checks, which most banks will mail out for you in their bill pay service. But you’ll need to set them up for payment at least a week before their due date, whereas with electronically sent payments they can be sent just a few business days beforehand.

Formula For Paying Down Debt Efficiently
(Hint: It’s not about the interest rate!)

First you’ll want to decide how much extra, if any, that you can pay towards your debt every month. If at all possible, shoot for $200 or more. But even if you can only spare $20 per month, make the commitment to do it every month.

Then apply the following formula to all of your credit card debts:

Total debt balance
------------------------ = Factor number
Minimum payment

Sort all of your debts by the resulting factor numbers, starting with the lowest factor number at the top. The one with the lowest factor number is the one you’ll want to pay off first.

Then send the extra amount to the creditor with the lowest factor number, along with the minimum payment. For example, if you’ve decided you want to pay an additional $200 a month on your debt, and your minimum payment is $50, you will send $250 to that creditor. And you’ll send the minimum monthly payment to all the other creditors.

Every time you pay off one debt, take the ENTIRE payment amount (including payment plus extra amount) and send it to the creditor with the next lowest factor number. Once that one is paid off, take the entire amount that you had been sending to BOTH previous creditors, including the extra amount, and send it to the third creditor. And so on, until your debt is completely paid off.

This will have an exponential effect on your debt, and you’ll be amazed at how quickly it goes down! (Credit for this technique goes to Loral Langemeier at Live Out Loud – thanks, Loral!)

But What If I Can’t Even Manage My Minimum Payments?

If you can’t manage to make your payments, there’s still hope for you!

You will want to negotiate with each creditor to reduce your payment amount, and to reduce your interest rate. Most, if not all, of your creditors will negotiate with you on both of these points. And eventually, when you’re ready to pay off the debt, they may also negotiate a lower payoff amount – sometimes as low as one-fifth of what you owe. So don’t hesitate to ask them what they’ll accept as a payoff, if you have an extra thousand or so to spare at some point.

Keep in contact with them on a regular basis, and show good faith and willingness to resolve this situation. If they’re unwilling to cooperate, tell them that if they don’t help you, you will be forced to file bankruptcy (but in a nice way). They may just change their tune. I have found that most of them are quite willing to help, and often very nice – they’re not the big bad debt monster you may imagine, ready to come break your kneecaps. But only if you cooperate with them.

If you simply don’t have the fortitude to deal with this right now, and feel like hiding under a rock instead, see if one of your friends or family members can help you with this. Think about whether any of them have good diplomacy skills, and enlist their help to negotiate with your creditors.

If all else fails, find and work with a VERY legitimate consumer credit counseling service (CCCS) that will do this for you. They will charge you a fee, and many of these counseling services are not honorable. So be sure to do your homework and get some good recommendations before calling any of them. Search the Internet once you find one you like, and double or triple check that they don’t have any pending lawsuits or civil suits.

Also be aware that if you sign up with a CCCS, this WILL impact your credit for a few years. Your future creditors will know that you have been in such a program, and they may deny you credit for doing so.

Beware of balance transfer offers. I tried this, and it worked well for a couple of years until the banks got smarter. They will gladly offer you 0% to transfer your balances, and then in a few short months they’ll find an excuse to jack up your rates to 27.99%. This is true even if you have always paid the minimum amount, and on time. So if you choose this route, you must be very diligent and watch them like a hawk. And you will want to have several other alternative creditors ready to go once they raise your interest rates. Generally, I’ve found it’s not worth trying to play the balance transfer game.

However, you can tell them that you will transfer your balance to another card if they jack up your interest rate. Call them and tell them you have some cash advance checks just waiting for your signature, unless they’ll agree to lower your rates right now. Oftentimes this will work, and you’ll get a lower rate while you’re on the phone with them.

How To Deal With Debt On A Personal Level

Next, you’ll want to reduce your fear about your debt. It’s perfectly natural to feel something close to terror in your situation – I know I did! But it’s not necessary. Remember, you have complete choice over how you feel about everything in your life, and your debt is no different. Fear is the most damaging and most powerful of emotions, and will only perpetuate this situation.

Your debt didn’t grow overnight, and likewise it won’t go away in a day. It’s like the cruise ship the Queen Mary, and will take some time to turn around. But it can be done, by following the steps outlined here. The key is to remove as much of the emotion about it as you can, and simply move on with your life as if it doesn’t exist. Of course you still need to give it some minor attention, but not your focused attention.

Every time you find yourself worrying about your debt, immediately ask yourself these questions:

Is this affecting my life right at this very moment? Do I still have food, shelter, whatever I really need to get by? Do I have enough to get through the next few weeks?

If you discover that you are actually okay (hallelujah!), then express gratitude (see the Gratitude Prayer) for what you have, right now. Realize that you are doing just fine right now, and everything is okay in this moment. Your worst fears have not yet been realized. So try to act as if it isn’t even there. After all, your payments are being made automatically, if you’ve signed up for an online bill pay service. Remember, out of sight, out of mind.

Next, be sure that your focus is on your income, not on your expenses. This is not to say that you should ignore your expenses, or that you shouldn’t cut out unnecessary expenditures wherever possible. But if you focus on increasing your income (and on growing your assets), you are putting your focus on your abundance. Conversely, if you focus on cutting costs, and on all the big expenses you have, your focus is going to be on lack of money. You’ll want to make sure that you’re focusing on all the good that is coming to you, not on how much it costs you to survive.

The other benefit of putting your focus on income and assets is that you will cause them to increase over time. I’m all for making even more money, with which to afford a more comfortable life, rather than on cutting costs to save money. See the difference? It’s all about abundance vs. scarcity thinking.

Moving Forward

Once you get beyond the mental crisis mode, begin to look at why you have created this debt, either consciously or unconsciously. You can use this information to take a closer look at what may lie underneath. It could have been the result of some limiting beliefs about wealth, or scarcity, or even feelings about not being worthy of having abundance. Or it could have been related to an illness which brought big medical bills. In my case, it was a combination of really dumb decisions which caused the initial debt, followed by years in college and grad school that exacerbated the debt.

As long as you are in debt, you can’t have the finer things in life, can you? (Or perhaps that’s how you got into debt in the first place.) Either way, it’s often caused by a limiting belief. Perhaps deep down you believe that you don’t deserve what you have, so you have to pay for it over and over again, never allowing yourself to own the nice things you’ve purchased free and clear. Or it could be something else entirely. But it’s well worth spending a little time thinking about why you incurred this debt in the first place, so that you can avoid this problem in the future.

There's a great book called the Energy of Money that you may want to read, by Maria Nemeth. The author suggests lots of self-examination exercises to help you work on your mindset about money, given your specific situation, as well as some conscious creation information you may also find helpful.

One of our members also offered this excellent suggestion:

"Here's another "no brainer" type thing people can do like ebill pay--call the electric company and people who supply your heat and get on a fixed plan--I started this last fall when the heating season started and it has made my finances less bumpy. Instead of paying an unknown amount in electricity and heating each month I pay the same amount--if I ever decide to move or withdraw I would pay the balance due. With my heating company, apparently the plan automatically runs out and you have to renew it. This happened to me this month and it was a blessing! Instead of paying my usual $80 a month, I am paying $11.32! And the difference is so welcome because of my variable income! There is a certain security in knowing the amount of a bill before it arrives and it gives me freedom elsewhere. In the dead of winter when fuel is high, instead of paying $150 or whatever in heat with no money for food, the plan gives me flexibility."

Be sure to read our articles on manifesting desires and limiting beliefs. And sign up for our free 5-Lesson Mini-Guide To Conscious Creation to get yourself headed into a debt-free and abundant direction.

By Jessica LaRock