Debt Denial? Get Your Head Out of the Sand!

Ignoring your credit card bills won't make them go away.

Jul 6, 2014 at 12:00PM

The long-held belief that ostriches bury their heads in the sand when scared or threatened turns out to be a myth. Unfortunately, many humans do the same thing -- figuratively, at least. The source of our fear: credit card statements.

Your debt isn't going anywhere 
No matter how many debt-collection phone numbers you block or how many debt-related emails you leave unread, your debt will not magically disappear. Ignoring it is probably making it worse. Compound interest can be your friend or foe. When you're in debt, it's your foe.

Credit card companies have incredible tenacity. The only way to get them to leave you alone is by paying off what you owe.

The good news is, you can turn your debt situation around. It will probably turn out to be a pretty expensive life lesson, but it's going to be OK. Let's get a handle on your debt and pay it off!

That's easier said than done -- I don't have the money to pay off my debts!
We'd all pay off our debts if we had the means, right? Perhaps, but many people may have the funds available and don't even realize it. If you've been dodging your debt, you probably aren't paying very close attention to your finances in general. Here's how to get started:

1. Figure out the damage. Open up the letters and emails, answer the debt collection calls, and pull your credit reports. You can't make a plan to get out of credit card debt until you know exactly what you're dealing with.

Write down whom you owe, what you owe, and how much it's costing you. List these debts from highest interest rate to lowest -- this is the order in which you'll pay them off.

That thing you were so afraid to do? It's done.

2. Look at your budget. Take your monthly net income and subtract all of your monthly expenses -- both fixed and variable. How much is left over? This number should cover your minimum credit card payments and then some. If it doesn't, or there isn't as much "then some" to throw at your debt as you'd like, you have three options -- make more, spend less, or both.

Make more money by asking for a raise, working overtime, getting a second or third job, freelancing, or starting a business with low start-up costs in your free time. Cut expenses by evaluating all bills, cutting out what is unnecessary, and reducing excess if you need to. If you really want to attack your debt, make more and spend less.

3. Talk to your creditors. You've been dodging them for a while, but the best thing you can do is communicate with your creditors. There's a person on the other end of the phone, and he or she will be more likely to work with you if you lay out your plan for repayment. In the future, always do this. It will make your financial life so much easier.

4. Get to work. It's time to pay off the debts. The money left over after you pay your monthly expenses should be going toward your debt with the highest interest rate. Make minimum payments on all of your other credit cards while focusing on this target debt. Once it's paid in full, focus your efforts on the next debt on your list.

If you use a debt payoff calculator, you'll be able to estimate how long it will take you to pay off debt using your current payment plan. However, you may find you end up paying off your debt even faster. Sometimes, money seems to appear when you're determined to reach your goals. Use cash windfalls -- gift money, tax refunds, rebates -- to pay down even more debt, and you'll probably be debt-free ahead of schedule.

The bottom line
The only way to deal with credit card debt is to face it. Figure out what you owe, come up with a budget, communicate with your creditors, and then pay it all off. The ostrich approach won't solve any of your problems. Get your head out of the sand, and get your financial life together. After that, you won't have anything to hide from.

*Nerd note: Ostriches actually run when they're scared or threatened. Don't do that either. Ostriches are proving to be terrible role models. Fortunately, they aren't eligible for credit cards.

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