Carrying a lot of credit card debt can take both a emotional and financial burden. It can create a sense of helplessness. It can be very easy to become frustrated that nothing you can do will remedy the problem. It can be easy to become depressed and to shy away from the problem.
But financial hurdles, just like other problems, are best faced head-on with a definite, slow-but-steady plan. Remember, your goal is not to be debt-free tomorrow, but to be less in debt than you were a month ago. With the right amount of discipline and planning, you can gain the upper hand with your debts.
The first step to becoming debt-free is probably the most emotionally taxing one, figuring out exactly how much you owe. This step can be as painful as it is necessary. Take a hard look at all of your bills. When listing your credit card debt, note the total balance due, the interest rate and the minimum payments. While it may be depressing to take this step, remember that you are doing this to drive yourself out of debt, not into despair. In order to develop a strategy to solve this problem, you need to shine a harsh light on your finances, and look at the cold, hard numbers.
Once you have your credit card bills gathered in one place, your next step should be to break up your collection of plastic. Keep only the two cards with the lowest interest rates, and commit yourself to using them only in cases of emergency. Your goal of getting out of debt will be nearly impossible if you pile new debt on top of old.
Next, if you have any credit card balances with low balances that can be paid off in one or two payments (as you continue to make the minimum payments on your other cards), consider paying them off first. This may provide a much needed, well-deserved motivational push if you are able to quickly eliminate one or two credit card balances.
When tackling credit cards with significantly higher balances, take another look at your debt tally sheet and attack the credit card with the highest interest rate. Continue paying the minimum balances on the other cards. One simple way to keep up on the minimum balances to sign up for an automatic bill payment service, so the minimum fee is deducted from your checking account automatically.
When deciding how much to pay on your highest interest credit card, the key is to stretch yourself as much as you can, without going past your breaking point. Definitely cut back on some perks or extras in your life (For example, you can save as much as $3 a day by switching your daily latte habit for a regular cup of joe at the local coffee shop), or see if there are simple, everyday ways tosave money. But at the same time, remember that your credit card debt is not your most important bill. Definitely prioritize, put your mortgage or rent payments and transportation costs and food above your debt.
Once you have paid down the card with the highest interest rate, repeat the process with the next highest rate and on down the line until you have successfully paid down your cards.
Once you have successfully paid down your credit card debt, consider extending the same strategy for a few months to developing a savings account. Instead of paying your creditors, you will be “paying yourself,” and developing a nest egg so you will be able to weather future financial storms.
By David Plowman
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