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.

Your credit card may soon be completely worthless
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4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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