Debt-aholics Anonymous: 6 Steps to Becoming Debt Sober

Have you ever met an alcoholic in denial?  Someone who obviously is drinking too much, too often, and doesn't think they have a problem?  No matter what you do or say to them, they aren't going to overcome a problem they don't think they have.  Debt-aholics (people who spend more than they make) have to admit there is a financial problem before they can overcome it- just like an alcoholic would need to admit they need help for their problem.

Here are 6 Steps to Becoming Debt Sober:

1) "My Name is Debbie, and I'm a Debt-aholic." 

In any recovery program, the first step is to admit you have a problem.  Only then will you be able to take steps toward finding the solution.  Whenever you spend more than you make, or spend more money than you  have available to spend, you are overspending.  It doesn't matter if you overspend by $50 a month or $5000 - the result is the same: Debt that has to be repaid.  Once you admit you have a problem, make the commitment to doing everything you can to become "sober".

2) Understand the extent of your debt and make a list.

No one likes to see it on paper, but in order to fully understand what you're up against you'll need to spend time gathering all of your debts and putting them on a list.  Include credit card bills, utility bills, loans, car payments, money owed to friends or family, etc.  Put it all down so you can see it... and add it up.  Once you have everything on your list, put it in order from the smallest amount owed to the largest amount owed.  Don't think about interest rates and the number of months remaining on the loans at this time.

3) Just say no to credit cards and spending.

A recovering alcoholic should never take "just a sip" of an alcoholic beverage, right?  A recovering debt-aholic needs to get rid of credit cards to reduce temptation, and cut back on spending to the bare minimum in order to make progress paying off existing debts.  You can cut back spending by getting rid of non-necessities (at least for now), cable television, cable internet access, restaurants and take out food, landscaping services, magazines, dry cleaning, newspapers, dog walkers, etc. 

You also need to stop turning to credit cards when the money is tight or when you need an 'extra' boost of money.  Just stop using them all together, even though that might seem impossible.  Cut up your cards and keep paying them off.

4) Earn more money

To accelerate your debt recovery, you should constantly be on the look out to bringing additional money into the household.  Look around your home- it's almost always a breeding ground for "stuff".  Stuff you don't use, stuff you don't need, and that stuff can be sold for some extra money.  Things with tags still on can often be returned to the store.  Gently used items are perfect for yardsales and eBay or Craigslist.  Higher priced items can be listed in the newspaper classified section.  All of the money you gain from selling stuff should be used to pay the smallest debt on your list from step 2 until that is paid off. (then the extra money is sent to the next item on the list)

You  may decide to get a second job, or change jobs in order to earn more money.  Perhaps you can do some freelance work from home to increase your income, as well.

5) Your Plan

I'm a big advocate of the snowball method of repaying debts.  Once you've made your list and put it in order, you just pay the minimum on all accounts except for the first one on the list- and to that one, you send as much money as you have after paying your living expenses until it's paid off.  While you're doing this repayment plan, include 'savings' as one of the accounts you have to pay a minimum to each month, even if you only contribute a few dollars a month at first, make sure you do it.

6) The repayment high...

Once you start seeing your debts getting paid off, you're likely to experience the repayment high... it's a naturally induced high that is a result of seeing old debts get paid off.  You tend to get so excited about paying off debt that you just can't wait to send money to your other creditors.  You may find additional money someplace, use a tax refund to pay off old debts, find new ways to increase your income- all to experience the repayment high!