Eliminate Credit Card Debt
How do you Get Credit Card Debt?
Credit cards are easy and convenient. When you want to buy something, it doesn’t matter if you have the cash to buy it as long as you have a credit card. Charge it whether you have the cash to back it up with now, later, or never, right?
It is unfortunate that so many people feel this way. They don’t realize that what they are doing now is going to hurt them in the future. Credit card debt is so easy to fall into. All you have to do is buy something with your credit card. That is debt until you pay off the card. If you only make your minimum payment each month, you will have a balance left on the card that will collect interest. As the interest accumulates, the debt increases. Keep charging and paying only the minimum payment and the debt grows and grows.
Credit card debt doesn’t seem like a big deal at first. As long as you pay the minimum payment each month, you’re okay, right? Wrong. This only means more and more debt will build. Eventually, it will become a huge problem when you can’t make the minimum payment. That’s when you’ll start getting harassing calls from credit card companies, you won’t be approved for loans, such as a mortgage, because you will have bad credit from missing payments, and everything will come crumbling down on you.
Eliminate credit card debt now before it gets this bad. If you let it get this bad, you could end up declaring bankruptcy, losing most of your possessions and anything of value, and having destroyed credit for 7 to 10 years. This can even effect your ability to get a job, let alone a home mortgage or apartment. Stop asking for credit limit raises and start paying off your debt.
How to Eliminate Credit Card Debt
The process of eliminating credit card debt is easy. The hard part is forcing yourself to follow the process. Here is a basic plan that you can tailor to your own debt situation. By “tailor” I mean cutting out your frivolous spending.
- Stop using your credit cards. Don’t cancel the cards, this will hurt your credit, especially if you have a balance. Instead, cut them up and stop using them. Get familiar with cash again. Better yet, stop buying stuff to begin with.
- Set up a budget. A budget will trim the fat of your spending. Whether you have $1,000 in debt or $50,000 in debt, the fastest way to pay it off is to spend as much time as necessary living on very little. If you have a lot of debt, this may require downgrading to a cheaper apartment, cutting down to a basic phone plan, cutting out cable, etc. If you have only a couple thousand dollars, you can do the same and pay off the debt much faster. You might be able to get rid of it within a month or two by going to the extreme. You don’t have to go this extreme, but it will be longer and more agonizing if you don’t.
- Maintain a budget. Even after you’ve paid off all your debt, you should maintain a debt. Not only will this avoid debt in the future, it will help you to build up your financial wealth. Save an emergency fund of 6 to 8 months of living expenses. Max out your retirement accounts. Finally, instead of splurging on every shiny new toy you come across, spend a couple months saving for big purchases. You will appreciate them more, or you will decide it’s not worth it.
Eliminating Credit Card Debt when you Can’t Make your Payments
What happens if you can’t afford to pay the minimum payment on your credit cards? If you can’t manage the minimum payment, you definitely can’t get ahead, or so it seems. Before you run to your lawyer to declare bankruptcy, you need to take a good hard look at your finances.
If this is you, you are the exact person who needs to cut out everything. What do you need to survive? Food, water, shelter, heat, transportation, etc. You don’t need an internet-enabled cell phone, cable or satellite TV, eating out, going to movies and shows, new books, music, clothes, and electronics, etc. You’ve gotten yourself in a dire situation by being foolish with credit cards. Now you need to take responsibilities for your actions.
Some of you may have hundreds or thousands of dollars extra you can save each month that you assumed were necessary expenses. If you are only just now able to pay the minimum payments and/or you want to pay off the debt even faster, consider downgrading even more.
Do you live in a huge house or apartment? Downgrade. If you own your home with a high mortgage, you will need to do some calculations about whether selling your home at a loss will save you more over time. If you own your home without a mortgage, selling it an spending less on a smaller house will give you a lot of extra cash to put toward your debt. You will also save on utilities and maintenance costs.
Do you have a fancy car with a big payment? Look into how much money you could get by downgrading to a very inexpensive car. You might be able to pay an extra couple thousand toward the debt saving hundreds a month in payments. Again, this will take some number crunching to determine the right choice.
If you’re really in a bad situation, you might be able to move in with a friend or family member and save a ton on mortgage payments or rent each month. If someone is kind enough to do this for you, be sure to thank them in many ways. Help out considerably around the house, cook, clean, etc.
One easy way to help is to get a second job. A part time job can contribute hundreds a month. If you have a two income family, you could potentially add another full time income by having both individuals work part time.
As you can see, many situations can be mended with some time, sacrifices, and hard work. If after this, you still can’t manage, bankruptcy might be your only choice. Take some time to go over your finances and crunch the numbers to see which is a better choice.