How To Get Out of A Debt Hole

Debt can cripple your finances and your life, but if you find yourself in a debt hole what can you do to get out of it?

I personally found myself in a lot of debt, experienced the overwhelm and had to claw my way out of it. Here are some of the things that helped me.

Free budget template

0:00 – Introduction
1:05 – Being in debt is super common
1:42 – Admit that you messed up
3:39 – Write down all of your debts
4:45 – Let the overwhelm wash over you
5:26 – Create a budget where your debt payments are automatic
3s
7:16 – You may need to take drastic action
8:42 – Stop yourself getting into more debt
9:11 – Accept generosity but don’t expect it
10:39 – Bring people around you who will support you paying off your debt
11:39 – Focus on earning more money
13:48 – Build up a buffer
15:22 – Pay off those debts in a way that works for you
17:32 – Summary

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How to Deal with Debt Collectors

Transcription:

Ryan 0:00
Debt can be extremely crippling, it can cripple your life obviously cripple your finances, it can cripple your emotions and just make everything really hard to deal with. And it can be really hard to get out of that debt hole. Last year after a separation and relocation into state, I found myself in quite a bit of debt and in my own debt hole. And it really took me a year to 18 months to really get on top of that debt. And to get out of that debt hole and feel like okay, I’m on top of this, now, I can see that this is going to be paid off in the future. So I’m not completely out of debt yet. But I’m out of the worst of the situation where it’s like, this is just, I’m completely in this hole, I don’t know how I’m going to get out of it. I don’t know how I’m going to afford to pay this debt and continue to live my life and kind of come through that journey, and come out of it. And hopefully, you can learn from some of my experiences. And what I did, hey, I’m Ryan from OnProperty, helping you on your journey to financial freedom. And let me just first say that being in debt happens to so many different people. So it’s nothing to be ashamed of. And if you’re listening to this, and you’re in debt, and you want to get out of it, then good for you. Because most people won’t actually sit down and watch something like this or go through the steps to get out of it. They’ll just live in it for the rest of their lives. So I applaud you for stepping up to the plate, and for actually trying to get out of your debt hole. So how can we do it, I will say this is not financial advice. I’m not a financial advisor. This is for general educational purposes only. And something that helps me, I think the first thing that is really important to do, or at least was important for me, is to just admit that you fucked up, like admit that you did something wrong and that your past self didn’t make the greatest decisions to put you in the best position. Now that might be you were just frivolous with your money and you were being silly, it might be that you didn’t have the foresight that you have. Now, it might be that things happen that you didn’t predict or didn’t prepare for. For me, I was financially free through my businesses, or I call pseudo financial freedom. My businesses were kind of earning enough money that I didn’t really need to work much. But I live right on the line, or maybe a bit over it. And I didn’t build any buffers into my life. And then what happened was I went through a separation business went through a downturn. So my expenses went up significantly, at the time, my income dropped, and there was all of a sudden this big gap. And really quickly, I went into a decent amount of debt, a significant amount of debt for me. And so, you know, that kind of happened. And there was mistakes that past Ryan made. that put me in that position, there was decisions that I made through that separation, where I over committed to things definitely, there were situations leading up to that where I didn’t create any buffers or savings in my life, and actually built up a little bit of debt over time. So when that situation came crashing down on me, I was ill prepared for it. So I made a whole bunch of mistakes to end up in the position that I was in. And I had to sit with that to say, Okay, I made those mistakes, but I like to look at it as past Ryan made those mistakes. Ryan from the past who didn’t know what I know now, who isn’t the person that I am now, he made those mistakes, and those mistakes are done. There’s nothing I can do about it. So let’s just let go of that shame. Let go of that and just admit, okay, I stopped out, what are we gonna do now, the next step was a really important one for me, because up until that point, I’d been in a bit of denial, I didn’t know how bad my situation was. And that created anxiety in and of itself. And so the next step was to actually write down all of my debts, every dollar that I owed to whoever I owed it to. I wrote that down. I also wrote down the interest rates on those I wrote down the minimum repayments as well. And so I wrote it all down, and I had a total figure of how much debt I was in. And let me just say that it was a bit shocking. And it was kind of like, wow, oh my gosh, like I’d never actually put it down on paper. But I think it’s a really important step to have that number and to know what you’re actually dealing with, so that you can go ahead and work at paying it off. So writing it all down, it’s tough. It’s really tough to sit down and be like, Okay, I’m going to do this, how bad Am I in this, but doing that and seeing that number is actually quite freeing. And the next thing I did is just you let it wash over you let that overwhelm wash over you. This number is too big. There’s no way that I can reasonably pay this off. I don’t know what I’m going to do with this. I just let that overwhelm wash over you

and I think part of having that number of pot of seeing at pot a feeling that overwhelm is that you can’t be overwhelmed forever you can’t live in a state of constant overwhelm and so eventually that kind of dolls in what looked like a really big figure in the beginning it’s still a big figure but it doesn’t have that emotional impact on you anymore because you’ve let all those feelings wash over you and now you’re just like look this is my situation this is where i’m at i’m going to have to deal with it and the next thing for me was to create a budget where my debt payments were automatic so i’m actually not even talking about really paying down the debt at this point in time and just focused on not getting into more debt and making my minimum repayments so it’s kind of like you dug yourself a debt hole okay let’s stop digging so it’s doing a budget where when you get paid automatically your minimum repayments for your debt come out there deducted like your rent might be deducted or your mortgage might be deducted from your pay i put that much significance on my minimum debt repayments to make sure i was meeting those so that i didn’t get any creditors coming after me or anything like that now i don’t have any experience with being followed by creditors or anything like that so i will link up to a video down below where someone talks about what to do if you’re being approached by creditors trying to get you to pay back the debt i didn’t have experience with that so i’ll link up to that down below but i created a budget to try and get myself to this equilibrium where i’m living my life but my at least my minimum repayments on my debt are getting paid for and i’m not getting further into the debt hole and i’m going to do a video soon on the 15 minute budget and how i wrote out this budget to understand okay what is my income what are my expenses what i have leftover to live off and so i’ll link up to that down below when that’s complete or you can go to onproperty com au forward slash budget and you can get a cheat sheet of the 15 minute budget and the template for over there so that’s onproperty com au forward slash budget if you’re interested in that so going through this budget and doing that trying to find that equilibrium you might need to take some drastic action and so for me i needed to take some pretty drastic action in my life and for me that was moving back home with family to reduce my expenses rent being obviously a major expense now this is something that i’ve always stood on my own two feet i’ve since i’ve moved out of home and got married at 20 i never relied on my parents i was always self sufficient and paid for myself they may have helped me out with things here and there my parents have always been very generous but i really sort of mind to fate and so to tuck my tail between my legs and to move back in with family and to take that drastic action was really difficult to do i did that for six months i then moved out of home got an apartment but then you know things didn’t work out as well as i planned six months later i had to move back again in order to save money i also had to take drastic action to move my children out of private school where they were quite happy and to move them into a public school luckily they actually even happier in the new school now and it’s not as expensive but for me and for my ex that was a really big step to say okay we’re going to move them out of this environment into something that’s going to be cheaper but may not have been exactly what we wanted but let’s give that a go and see how it goes so i took some drastic action there to lower my expenses and at the same time you want to stop yourself getting into more debt so no more credit cards no more personal loans or anything like that i was like okay i’m not gonna get into any more debt until this debt is paid off so that’s out of finding that equilibrium trying to take that drastic action get to that point where okay you’re at least paying for your minimum repayments maybe even paying off some of your debt and you’re able to live your life and not get further and further into the hole

i’m going to take you outside for the next tip and that is to accept generosity but don’t expect it being in debt and you know having this situation has been hard but there’s been amazing people in my life who have been quite generous to me but i didn’t expect it i don’t ask for it but sometimes it happens and i really struggled to accept generosity but i have been able to do it behind me you’ll see my car unfortunately the radiator blew out on it it is not worth fixing at the moment it’s just going to cost more than it’s actually worth in order to get that car fix that sucks right i’ve lost my car at a time when i’m trying to pay off my debt my car has blown out now if we go ahead and swing around you can see the car here now this this car is from my partner’s brother and it is his old car and he’s lent it to me for the time in order to drive it around it’s not perfect it’s an old car two doors and i’ve got kids so it’s not ideal but it’s extremely generous of him and i’m extremely fortunate to have people in my life who are willing to do that for me and i said to that generosity and rather than get into more debt to buy a new car it’s like okay i’m going to putter around in this until i’m in a position where i can buy a used car with cash because i don’t want to get into more debt so i’m accepting the generosity in my life and another thing is to actually bring in people around you who will support you in paying off your debt and who will support you in actually living a life where you can pay it off so i’ve got great people in my life my partner is really great and then i’ve got ben the buyer’s agent from pumped on property he’s one of the few people that i can actually talk to about finances and he doesn’t judge me and i remember telling him my debt and telling him the exact amount he’s like dude is that all you’ve got so you can do this he’s like i’ll trade with you like i got way more than that he’s got investment properties in good debt but having people like that who like you can do this you’ve got this and who will support you and even my partner knowing the situation that i’m in you know we’ll do fun stuff for free that doesn’t cost a lot of money and then when we go out we’re not you being excessive or anything like that we’ll find good stuff that we can do that doesn’t cost a lot of money so i’ve got some great people in my life to support me so you want to get some of those people because that’s going to help you emotionally get through reducing your debt as well the next thing which i think is extremely important and not talked about enough when it comes to savings when it comes to debt reduction and that’s actually focus on earning more money focus on creating more income and more money flowing into your life and there’s so many different ways that you can do this you can do this through your career advancing in your career changing jobs that sort of thing you can also do it by starting a side hustle for me at the time i took drastic action to get my equilibrium back and i was working part time in a cafe in order to have that equilibrium there but i was solely focused the majority of my time on actually building up extra income through my business now i run online businesses so for me i had an avenue to do that but there’s so many different ways that you can add more income into your life but for me that was a focus get that equilibrium and then try and earn more money and that extra money that i earn what i use that for do i use that to live a more luxurious life no i use that extra money that i made to actually pay down the debt so earning more money is super important you could start a side hustle like i do and have your own business you could mow lawns you could do handyman work for people you could even do something like the $1,000 project which is a book

by kenneth campbell i’ll link out to my book review on that down below but the idea behind that is you look at saving $1,000 chunks at a time she uses that to invest but you can also use it to pay down debt and that can be simple things like okay i’m going to sell all of my used items in a house that i don’t need anymore maybe you don’t need your computer anymore you’ve got a new one or you’ve got old iphones kicking around i’m going to list those i’m going to sell those on facebook marketplace or ebay or whatever that $100 or a couple $100 i get that’s going to go into my $1,000 project account and when that account reaches $1,000 i mean take that out and use that to pay off a chunk of debt so focus on earning more money in whatever way you can me personally in my life i then focused on building up a buffer so as i was earning more money rather than just pouring that straight onto the debt straight away i guess i learned from my past experiences where shit happens in life right that you can’t expect and if i was to have a really bad month with business or a bad couple of months with business and i had put all of that spare money onto the debt my debt would be less but i would no longer be able to meet my minimum repayments and then i might get creditors coming after me so rather than pouring that money onto the debt straightaway which obviously is better from an interest perspective i actually started to build up a buffer and build up a little savings account now the goal of that mind is to pay off debt and ideally if things all go to plan that money will eventually just be funneled onto the debt to pay it off completely but at the moment that money is sitting there that if things happen in my life i’m not going to get further into debt and i’m going to continue to be able to meet my minimum repayment so that buffer fund that exists there so that i can keep that equilibrium in my life not getting into more debt or not getting into a really stressful situation because having debt Not being able to pay that debt is extremely stressful. And in the next video, I’m going to talk about how I dealt with the emotions and the stress of being in debt. And hopefully that can help you out. Again, I’ll link up to that down below. But building up that buffer, I feel is really important for me. And it’s up to you whether you want to do something like that or not. And then lastly, is to go ahead and pay off your debt over time. So if you’ve reached that equilibrium, you’re earning more money, using that extra money to build up a buffer or to actually go ahead. And to pay off that as those debts. How you want to do that is up to you. Different people recommend different things, some recommend the snowball effect, or the avalanche method, which is you start with the smallest loan that you have. So maybe you’ve got a car loan, that’s $20,000. But then you’ve got a credit card, that’s $500. Okay, well, it’s like pay that $500 off first and clear it so you don’t have it anymore, and you feel that victory, and then move on to the next size loan. And it doesn’t really take into account interest rates. Some people like to focus on the loans with the highest interest rates, and to pay those down first, because obviously, long term, if you’re paying less interest, then you can pay off your debts faster. But there’s not the emotional benefit of getting rid of a small debt first. Or maybe you want to do something like I do, which is I look at actually the cash flow impact of the debt that I have. So certain debts, this is their minimum repayment per week, or per month, if I was to get rid of that debt, how would that impact the cash flow in my life, and those minimum monthly repayments and that equilibrium? For me, it’s less about, obviously, I want to get debt free. But being having been in a debt hole where I can’t actually feasibly see a way of paying my debts. I know what that feels like. And I don’t want to be in that position again. So for me focusing on paying off my debt, it’s about minimizing actually the cash flow requirements, all those minimum repayment requirements. And so I’m building out that buffer, but then I’ll focus on paying off those debts where I can actually reduce those minimum requirements as quickly as possible. So if I’m in a situation where things are tough, those minimum payments are as small as possible. I’m not sure if that made complete sense. But that’s the strategy I use, but you pay it off in whatever way that you feel you want to and whatever way you think works best for you. So getting out of a debt hole can be really difficult. Really, it comes down to creating that budget, and finding that equilibrium where you’re at least making your minimum repayments. And so you’re not getting creditors coming after you and things like that. And then for me, it’s looking at, okay, how do I earn more money and using that extra money in order to build a buffer? Yes, but also to eventually pay off all that debt. So while I’m not debt free at the moment, I feel like I’m out of the debt hole, I can feel I can see the light at the end of the tunnel. And I’m hoping

to be debt free some point next year. And I’m really excited for that. Hopefully it pans out. As we know life takes the twists and turns so we will see how we go. But hopefully this has helped you. If it has, give us a live and subscribe to the channel as well. For more educational content like this. I wish you the best in your financial freedom journey in your debt reduction journey. Until next time, stay positive