It's that time of the month again; the bills are piling up and accumulating in a growing stack on the nearest table. You may let a day or two (or more) go by before opening them because you know what awaits your attention – a dreaded credit card bill. Don’t worry. You have the power to take control of your financial situation and to free yourself from credit card debt. By following these five steps, you can confidently state, “The check’s in the mail,” and mean it!
1) Create a Budget - and Stick to It
The first step to eliminating your credit card debt is to create a realistic budget. There are a few ways to do this - you could use an online service like Mariner360, or you could simply track your monthly income and expense on an Excel spreadsheet. By tracking your income and expense, you’ll be able to determine your spending habits and, if needed, be able to identify areas you may need to adjust your spending. The most important part of this step is follow-through. Make sure you stick to your budget.
2) Reduce Your Monthly Bills
Some monthly expenses are constant, such as rent, mortgage, or a car payment. However, some expenses are discretionary. Ask yourself where you can reduce your expenses. Are you able to downgrade to a less expensive data plan for your smartphone? Can you manage with basic television instead of the “deluxe” channel add-ons, can you eat dinner at home a few more times a month? Taking a more conservative approach to spending, at least for a little while, will help you get your debt under control.
3) Cut Out Unnecessary Purchases
Before you get out your credit card, ask yourself, “Do I really need that item?” Categorize your purchases into “need to have” and “nice to have.” Keep track of those “nice to have” items as this expense is within your ability to control. Do you really need 500 pairs of shoes?
4) Choose Your Payoff Strategy
There are two fairly common ways to pay off your credit card. The first strategy is to put all your extra money toward the credit card with the highest interest rate, while paying the minimum balance on the others. Once the high-rate card is paid off, you can apply extra money to the card with the next highest interest rate, and so on. This strategy should allow you to save money on accumulated interest.
The second strategy is to pay off the credit card with the lowest balance first, while continuing to pay the minimum balance on the others. This strategy is the quickest way to eliminate debt on a single credit card - not to mention the psychological benefit of one less credit card debt.
5) Reward Yourself
Paying off credit card debt isn’t easy. It requires dedication and a responsible attitude. Make a game of it and set goals that help you stay motivated and track your progress along the way. When you reach these goals, reward yourself – within reason. Remember that the decisions you make in the short term impact you in the long term. Enjoy your road to becoming debt free!
If you found this article useful, be sure to check out these related articles:
Establishing Credit for Beginners
4 Things the Easter Bunny Taught Me about My Credit
True or False? Five Myths about Credit Scores Unveiled