Nothing can put a strain on your personal finances like credit card debt. High interest rates and penalties can form what seems like an unstoppable tidal wave of debt. Make no mistake, though – it can be stopped. Household budgets everywhere are tight, but with a little restraint, willpower, and research you can dig yourself out from under and live a debt free life. Here are four reasons to get yourself out of credit card debt, and how to go about getting it done.
Reasons to Solve Your Credit Card Debts
1. Save Money
Even if you’re paying a nominal amount of interest on your credit cards, it’s going to take a toll on your financial picture. Whether it’s $20 per month or $200, it’s money you’re giving away, plain and simple. Imagine that same amount in your retirement account every month and let that motivate you to take action.
2. Improve Your Credit Score
If you think your credit score doesn’t matter much, you’re wrong. It affects your interest rates on loans, insurance premiums, and even your ability to find a new job. Your credit score should be treated as golden, and paying off your debts is one excellent way to improve it. Once you do, you increase your amount of available credit, which boosts your score. You also reduce your chances of missing payments, which can lead to negative marks.
3. Achieve Long-Term Savings Goals
Where are you in regard to retirement savings? If you’re not sure, use an online calculator to determine what you’re going to need to live comfortably once you call it a career. If you’re behind, your very first step should be to pay off your credit card debt. The same goes for college funds for kids and saving for a down payment for a home. Any interest you pay to credit card providers can be better invested elsewhere.
4. Less Stress
Eliminate your debts and you can enjoy life a whole lot more. You’re also likely to perform better at work – setting yourself up for that next promotion or raise – and improve your professional relationships. Credit card debt nagged at me for years. Now that it’s gone for good, I lead a much less stressed lifestyle.
How to Do It
1. Total Your Debts
Gather up your statements and figure out exactly how much you owe collectively. After that, you can prepare a plan for how to pay it off.
2. Start a Personal Budget
The Internet has plenty of free online budgeting websites – Mint is one of the best. Create an account, fill in your budget, and look for ways to reduce all monthly bills until your spending is less than your earnings.
3. Create a Pay-Down Plan With Goals
If your debt is $3,000 and you have a $150 surplus from your budgeting efforts, you should be debt-free in about 20 months. Commit to sending that amount toward your balances, and celebrate milestones along the way. Once you cut your debt in half, for example, reward yourself with a personal purchase or a night out. This might not seem to make a lot of financial sense, but congratulating yourself can go a long way in ensuring you stay on track.
4. Adjust and Revise as Necessary
If you set a goal and don’t reach it, the last thing you want to do is give up. Remember, you’re benefitting yourself tremendously just by addressing your debt problems, so if it takes you a bit longer than expected to reach a goal, be satisfied with your accomplishments and adjust and revise your plan accordingly. On the other hand, if you’re ahead of schedule, modify your goals in the opposite direction by making them more aggressive.
As surprising as it may sound, many people view credit card debt as an acceptable part of their daily lives. Don’t go that route – pay yours off as soon as possible. Once you do, you just may be shocked how much more money you have left over at the end of each month.
What tips do you know of to pay off credit card debt?