7 easy ways to overcome debt denial

Take charge of your finances

Leaving bills unopened, imagining your money problems will go away or hanging onto money instead of paying bills are all symptoms of debt denial. Remaining idle doesn’t make the problem go away; it just aggravates it. Debt collectors call, fees pile up and stress sets in.

The only way to conquer debt is to take action. As you wrestle with your debts, start with realistic expectations and follow these hands-on tips from Bankrate to overcome debt denial.

Add up your debt

Gather credit card statements, loan papers and any bills in arrears and write down in a notebook what you owe to each creditor.

“You now have a realistic number in front of you in black and white. This will take you out of denial and let you know what you need to do,” says Mechel Glass, director of education at CredAbility, a credit counseling service in Atlanta.

People usually underestimate what they owe, Glass says. Writing it down helps them to see if late fees or other charges are being assessed. Then, they can gain control and figure out how to address the debt.

Prioritize your bills

To prioritize your debt, address your most vital needs first like housing, utilities and groceries. Then list transportation and phone. After that comes IRS debt, medical bills, student loans and credit card debt, says Glass.

It’s important to work with hospitals, clinics or doctors’ offices on your medical bills, and they should work with you if you approach them, Glass says.

Some people may be behind on their mortgage loan because of job loss or a decrease in income. In that case, Glass recommends working with your lender and possibly doing a short sale or forbearance. In a short sale, you sell your home for less than the balance owed. With forbearance, your lender gives you a grace period to remain in the home without making payments, with the understanding that you’ll resume your payments on a specified date.

You might also qualify for a mortgage modification, which can mean reducing your interest rate or applying your delinquency to the end of your mortgage loan term.

“It’s very important to prioritize because those (debt) collectors, calling you every day and screaming the loudest, are not always the most important ones to pay,” says Glass.

Track what you spend daily

CredAbility counselors give their clients a pocket tracker to record their expenses, but a small notebook works just as well. Writing down where the dollars go for 30 days may help you find hidden areas where money can be saved.

“Most people are spending more than they think they are,” says Glass. “Often, they are using credit cards and that’s unseen money spent.”

For those who either forget to write it down or just find the process tedious, Glass has an alternative suggestion.

Open an additional checking account for discretionary spending on expenses such as gas and dining out, and use the corresponding debit card to keep track of what you spend on wants versus needs. Keep your main checking account for rent or mortgage, utilities, insurance, groceries and transportation.

“That not only keeps your spending to a certain limit, but you can also see where the money might be leaking from your budget by looking at your statement,” says Glass.

Create a simple filing system

A simple filing system ensures you pay your bills on time, suggests Kevin Gallegos, vice president of Freedom Debt Relief, a debt settlement company in Tempe, Ariz.

That system can be a folder placed in a certain place on your desk, a series of folders for each day of the month, a basket on the kitchen counter or an online calendar. Choose what works best for you and then use it religiously.

“Open all bills as soon as they arrive and put them into your filing system,” says Gallegos. “It’s necessary to make that process a habit.”

Bankrate.com offers more tips on how to organize your financial paperwork.

Look for unnecessary expenses

Divide your expenses into wants and needs, says Gallegos.

Although wants and needs vary from one individual to another, Gallegos suggests these costs as possible cutbacks — daily coffee drinks, cable TV and phone service.

On these items, Gallegos says your savings would be:

  • Coffee: $60/month, $720/year.
  • Cable TV: $40/month, $480/year.
  • Phone: $50/month, $600/year.
  • Internet: $45/month, $540/year.

“Often overlooked places where you can save are car insurance — shop around for a better rate — utilities that offer a discount if you have automatic payments set up, interest rates on savings accounts, eating at home instead of in restaurants and using coupons at the grocery store,” says Gallegos.

Sign up for a habit-changing program

Larry Tobin, co-founder of Habit Changer in San Francisco, an online self-help program, says you can change an unpleasant behavior like debt denial with his 42 days’ worth of tips and exercises. The Money and You program costs $19.95 and is delivered to your e-mail inbox or via text message to your phone twice per day.

“This program can be done in conjunction with other tips you use to fight debt denial, but you need to change your behavior, too, or you’ll keep having the same problem,” says Tobin.

Another debt-reduction program is the First 30 Days. There are also blogs, like Carnival of Debt Reduction, that can help you modify your spending habits.

Get help from a professional or trusted friend

If you don’t have access to professional credit counseling or can’t afford it, you can ask questions of experts online and remain anonymous. Rebecca Schreiber, a Certified Financial Planner of Solid Ground Financial Planning in Silver Spring, Md., suggests WiseUpWomen.tamu.edu, a government-sponsored advice website for women.

Sharing your money woes with a trusted friend often helps to put your problems into perspective.

“Sometimes we know what we need to do but just need to talk it out and have a sounding board,” says Schreiber. “Choose this person carefully, because of his or her personality, because they’ve had money problems themselves or because he or she is a good listener.”

Additional resources

For more information on debt management, check out these stories and more at Bankrate.com: