Of course, credit card debt is horrible for you financially. They charge so much in interest that even though you may be paying a hefty amount monthly, only a small portion of it is actually reducing your balance. This often means that you’ll wind up paying almost double what you charged, if not more.
Plus, too many credit card bills coming your way can harm you physically too. The stress can begin to build as you try to figure out how you’re going to dig yourself out from under the mountain of debt. Soon, you begin to experience chest pains, headaches and illnesses you would have normally been able to fight off but couldn’t because you spend a majority of your time tense and anxious.
Add that to the mental fatigue you get from trying to find a solution to your credit card problems and you’re in rough shape all the way around. You start to wonder why you get up and go to work every day just to pay creditors almost all of your income. It can be frustrating, disheartening and break every bit of spirit you have.
But, it doesn’t have to. You can work your way out of credit card debt. Granted, it’s not the easiest thing to do, but when you can see the light at the end of the tunnel, a life where you’re debt free and your paycheck is actually yours, it is so worth it.
Here’s how to make that dream become a reality:
Step 1: Make a list of all your credit cards
In order to come up with a plan, you first have to know where you stand right this moment. So, make a list of all of your credit cards that have balances. Write down the name of the cards, the amounts you owe and your minimum payments.
Total them up so you have your starting point and know exactly the absolute minimum you need to be paying per month on all the cards as a whole. It may look like a lot and feel overwhelming, but keep going forward and someday that number will be zero. I promise.
Step 2: Make a list of all your bills
Once you know how much you have to send out on just your credit cards, come up with a comprehensive list that includes all of the additional bills you have. While it’s easy to remember to add rent, utilities and things like that to the list, don’t forget other monetary obligations such as gas in your vehicle and weekly groceries.
Think of all the things you usually buy in a month’s time and assign them an average dollar amount. The more realistic you are, the better so try to be as accurate as you possibly can with these figures.
Step 3: Compare your debt to your income
Now you have a complete picture of the minimum amount of money you have to send out each month. Compare that to your income and what do you get?
If you make more than the minimum, that is great. With just a few simple tweaks, you’ll be debt free in no time. But, if you make less than required, it’s time to brainstorm (and move on to step number four).
Step 4: Increase your income
If you make more money than is necessary for the bills, good for you. You can probably bypass this step and go on to the next one. (Or, do it anyway and get yourself out of debt faster.) But, if you don’t make enough to cover your monthly bills, it’s time to change that. Luckily, there are a couple of options for you that can help do just that.
First, see if there are any bills you can either eliminate completely or lower. For example, if you belong to a movie rental program that costs you a monthly amount, drop it. Or, if you have a cell phone plan that is more than you need, lower it. Find places to cut corners. Even if it is just a couple of dollars, it will all add up in the end.
Another way to get more money coming in is to sell things. You could get rid of the stuff that is just sitting in your garage by having a yard sale. If you have nice stuff you could sell it on eBay or some other site. If you don’t use it or aren’t attached to it, turn it into cash you can use to get out of debt.
Of course, you could always either work more at your current job or get a second one. This may be difficult if you’re already on a time constraint, but remember that it isn’t going to be forever. It’s just something that you have to do until you get yourself in a better situation financially.
Step 5: Pay your debt down
Now that you’re in a position where you bring in more than you need to send out, it’s time to reduce your debt. If you do something that brings in a lump sum, such as sell something or get a tax return, drop it all on your debt. Sure, it may be nice to go and blow it on something you’ve been wanting, but you’ll have plenty of time to do that later. For now, lighten your monthly obligations by knocking them out as quickly as you can.
If you have nothing to sell and are working solely on income, calculate how much extra you have coming in per month and set out to pay off your lowest balance credit card first. For instance, if you owe on three cards and your balances are $800, $2,000 and $4,500, then aim to pay off the $800 card first. Just pay the minimum balances on the rest in the meantime.
You may want to pay off a higher balance one first if it is at a higher interest rate, but stick to the lowest balance. You’ll be able to pay it off quicker and that good feeling will keep you motivated to continue to work on the rest.
Once the card with the lowest debt is paid off, take what you would have paid on that, along with any additional monies you can spare, and pay off the card with the second highest debt. Remember, you’re still just paying the minimum balance on the other cards and throwing all of your extra cash to the lowest debt card you have. Keep this system until you pay off your last card. Yes, it may take a while but with some hard work and dedication, you’ll get there.
Step 6: Remove temptation
Don’t make the mistake of getting yourself out of debt and starting to charge items again. Remove the temptation to do that by cutting up the cards you have. If you want to save one for emergencies, that’s fine, but don’t save any more than that or they can be too tempting to use.
If there’s something you really want, learn to save up for it and pay in cash. That may mean that you don’t get to satisfy your urge to buy it right away, but if you save up and still want it, at least you know that it’s the right thing and you’re not giving in to an impulse buy.
Follow these six steps and you’ll see what it’s like to live debt free. Yes, it’s going to take some sacrifice on your part, but if you sacrifice now, you won’t have to do it later, when you should be enjoying life.
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