How to Manage Your Debt Anxiety

By Julie Bawden-DavisSavings Accounts

When it comes to debt, if you feel like you're treading water and getting nowhere or even drowning, take heart -- you're not alone.

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Plenty of people have been where you are, survived the struggle and emerged financially stronger in the end. Try these tips to help you cope with and eventually eliminate your debt issues:

1. Take a deep breath

If you're panic-stricken, you're more likely to make poor decisions and worsen your situation. Rather than focusing on how bad things are, make a list of all of your assets, such as your home, car and valuable possessions. Completing this first step can help you focus on the positives in your situation.

2. Be deliberate

Don't attempt an overnight overhaul of your finances. Going cold turkey with a strict budget has the same risks of a crash diet. You're OK for the first few days, but when the going gets tough, you may give up and overspend. Keep your anxiety level as low as possible by creating a realistic budget.

Start by assessing your income and spending. Then devise a plan that cuts those expenses by a reasonable yet meaningful amount -- maybe 10-15%. Once you adjust to those cuts, keep decreasing expenses each month until your spending habits and debt are in check.

3. Fill the void

Reducing expenses to save money can give you peace of mind, but make sure to keep new stress at bay by coming up with a plan for replacing the old things in your life that your new budget doesn't include. People can fill the voids in their life with either healthy or unhealthy replacements, so make sure you choose the former.

For example, if you start bringing your lunch to work instead of eating out, make a plan for how you'll constructively use that extra 45 minutes of time you save by making calls to friends and family or taking a walk -- not shopping online at your desk.

4. Increase your income

It sounds obvious, but a good way to stop worrying about money is to simply make more of it. Although a part-time job or working more hours is one way to achieve this, many other ways exist to raise funds. Do you have an available room in your home you can rent out? Does a neighbor need an hour of daycare each morning or her child driven to school? Do you have a hobby or skill you can teach others or apply on a freelance basis? Accessing new lines of income can have a major impact on how quickly you solve your financial problems.

5. Take control of credit

A key element of redirecting your financial destiny and setting your mind at ease is learning how to use credit responsibly and not as an extension of your pay check. Although this may be difficult to do initially, in the long run having a handle on your credit can give you priceless peace of mind. Once you've stopped using credit, you may find it much easier to pay off your existing bills as well.

6. Build up savings

It's important to pay down credit cards, but it's also critical that you build savings over time. That way when unexpected expenses come up like car and home repairs, you won't find yourself spiraling into panic mode. A nearly painless way to save is to automate your savings by having a specific amount of money taken from your checking account on a regular basis and redirected to an online savings account.

7. Set goals

Reducing debt is most enjoyable when you have a clear destination. Decide what your financial goals are and keep yourself motivated with visual reminders of those goals, such as photos taken from magazines and computer screensavers. Keep your mood positive along the way by indulging in low-cost or no-cost treats as you reach savings milestones, such as ordering a pizza or having an inexpensive lunch with a friend.

8. Avoid the lure of a quick fix

Don't let worries about your finances cloud your judgment so you jump for short-cut solutions. Generally speaking, it takes time and effort to get out of debt. If a debt settlement service approaches you with promises to erase your debt quickly, beware. The Federal Trade Commission warns that seeking assistance from the wrong debt settlement company can be risky and have a long-term negative impact on your credit report.

If you find that you can't deal with your mountain of debt on your own, consult a reputable nonprofit consumer credit counseling service instead. Expert guidance can often ease the strain of debt and help you see your situation and solutions more clearly.

Escaping the anxiety over excessive debt isn't easy, but it is possible. By staying on course with these tips, you can look forward to a time when you'll be able to examine your finances without worry.

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