Repairing the damage done by debt

In many ways, the hardest part about breaking up with debt is simply making the choice to put yourself on the path to financial freedom. Once you’ve done that – once you’ve decided that enough is enough and you really can’t take it anymore – then it’s just a matter of finding your plan, sticking to it and letting the momentum build.

Going forward, we’ll discuss some of the more important techniques to develop in order to stay on task, such as creating new habits and setting proper financial boundaries. But before you can really create a plan of attack you have to understand what you’re trying to fix, because the effects of debt rarely limit themselves to your savings account.

So in order to go forward you need to first understand how a destructive relationship with debt has affected you. It typically impacts you in four ways:

  • Impact on your credit report/score
  • Impact on your goals
  • Impact on your personal relationships
  • Impact on your self-image

Impact on your credit score

Simply having a lot of debt does not, in and of itself, mean that your credit score has been damaged in some way. However, when your bills get out of hand and you find yourself falling behind on payments, or even seeing accounts go to collections, that’s when your credit score has been most negatively impacted by debt.

Repairing your credit takes time – much more time than damaging your credit takes. The first step is to obtain a copy of your credit report. You’re entitled to a free report every year from each of the major reporting bureaus ( is an easy way to access your free report). Review your report and look for any and all negative reporting.

If you have accounts that have fallen past due, create a plan for how you’ll bring them current. If you have accounts in collections, reach out to the collection agency and try to negotiate a repayment plan.

If you need help reading and understanding your credit report, MMI offers many articles and webinars on credit reports. If you need help creating a plan to bring accounts current and pay down your debt, consider speaking with a certified credit counselor.

Impact on your goals

You probably have an idea of where you’d like to be in life, but chances are that if you’ve been struggling with debt for a while now you’re probably not there yet. Or even very close.

Don’t beat yourself up over ideas of where you “ought to be.” Instead, take this as an opportunity to reassess your goals. Do they still feel right to you? Have they changed at all?

No matter how debt has affected you, you can still reach your goals. The key is set SMART goals:

  • Specific
  • Measurable
  • Achievable
  • Relevant
  • Timely

Using this system ensures that your goals are focused, meaningful, and reasonable, while also giving you a set time-frame in which to achieve the goal. If you’ve got big dreams, create a path to that dream by setting a series of smaller goals.

Impact on your personal relationships

We all know that money can very easily disrupt otherwise healthy relationships. Over a quarter of all Americans feel that their marriage is impacted negatively by financial worries. Overwhelming debt can cause us to withdraw from others out of shame or embarrassment, resulting in lost or damaged relationships.

A strong support system is going to be absolutely essential on your path to financial freedom. Learn how to be open about your finances. If debt has caused you to disconnect from loved ones, reach out and make an effort to rebuild those relationships. If debt has caused a strain to your most important relationships, make addressing and easing that strain a central part of your plan.

For ideas on how to maneuver debt and finances in relationships, be sure to check out our Love and Money eBook.

Impact on your self-image

Your debt does not define you, no matter how big or scary it may come to be. You more than likely already know this, but it can be hard to remember when your bills start to get bigger and bigger and your dreams seem further away every day.

The stress caused by unmanageable debt can lead to headaches, high blood pressure, insomnia, heart attacks, and depression. It negatively impacts how we view ourselves as spouses, parents, employees, and friends.

Simply deciding to breakup with debt and make an active plan to improve your finances will go a long way towards repairing the damage caused to your self-image, but it’s important to make sure that you address that damage directly as part of your plan to become debt-free. As they say, money doesn’t buy happiness, but creating a solid financial foundation will relieve a lot of the stress that has prevented you from feeling the happiness you deserve.

Our eBook, Managing Debt to Improve Your Mental Wealth was written for just that reason. Be sure to check it out.

Jesse Campbell photo.

Jesse Campbell is the Content Manager at MMI, with over ten years of experience creating valuable educational materials that help families through everyday and extraordinary financial challenges.

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