How to Deal With Debt When You Work for Yourself

how to deal with debt
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Working for yourself can be extraordinarily rewarding — many small business owners say it’s one of the best decisions they ever made — but it’s hard to ignore the financial challenges, especially when you’re just starting out. Of the millions of Americans who currently work for themselves, many of them find themselves in debt without a safety net, which can be scary and, in the long run, impact your ability to do the kind of work you want to do. And while hiding from debt may feel like the easiest route, the real key is staring it in the face, acknowledging it, and then making a plan to conquer it. The best way to deal with debt is, well, to actually deal with it.

“It doesn’t feel good,” admits finance expert Galia Gichon, who says many clients come to her afraid to even confront the scale of their own debt, “but good for you that you’re showing up and facing the number. Let it settle in, process it, and then make changes.”

Galia says debt is often a built-in factor for small business owners and freelancers — after all, starting a business requires capital, and many people who want to work for themselves don’t exactly have that kind of spare change lying around. But understanding exactly how much debt you’re in, and how you’re going to get out of it, is as essential as any other part of your business planning. And there’s really only one way to get out of it.

“You can only get out of debt by changing your spending habits,” Galia explains. “Because why did we get into debt? Because we spent more than we had.”

To change your habits, says Galia, it’s important to make it easy on yourself — by making it harder to spend that money you don’t have. Stop carrying the credit cards you want to pay off. If there’s a monthly expense that’s nice, but not necessary, cut it. If there’s a big purchase you’d really, really like to make, but were considering putting on credit, wait until you’ve secured new work to do it. When your credit lines are no longer a part of your business plan, you can start working your way out of debt, while still having a slush fund for emergencies.

You can also look into improving your situation, just by asking your credit card company for a better rate.

“You’re at ‘no’ now. If you ask for something, you’ll get an answer. If you don’t ask, you’re at ‘no.’ Call the credit card company and ask them, ‘what can you do for me?’ Remember: You’re their client.”

Negotiating a better rate can help lower payments, and make it easier for you to make a dent in your credit, even if you income is lower than you’d like.

Avoiding tempting teaser rates is another good way to improve your credit overall. Consolidating to one card, and then leaving the balance on that one card is a much better way to use your time, Galia says, and can make your debt feel less overwhelming, because you’ll spend less time negotiating, and more time on your actual work.

Finally, says Galia, if you’ve looked for other ways to deal with debt and simply don’t have the money, it’s best to turn to the real experts for help. The National Foundation for Credit Counseling is a government organization that can help you find a credit counselor in your area, who can get you a low-rate, affordable payment plan. Because in the end, the best way to deal with debt is just to make a plan and stick with it, regardless of how unglamorous and even scary it can be to do so.

“I know this can be a tough part of the conversation; Don’t get down. Tackle it head-on,” Galia says.

Get more financial planning advice from Galia Gichon’s course, Personal Finance for Artists & Creatives


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Hanna Brooks Olsen is a writer and editor for CreativeLive, longtime reporter, and the co-founder of Seattlish. Follow her on Twitter at @mshannabrooks or go to her website for more stuff.