Running up credit card debt, it’s so easy to do, especially since we are all trying to achieve the American Dream— a new chair for the living room, braces for the kids, a new outfit for Saturday night dates, eating out with friends, and driving our new SUV that guzzles the gas and increases the insurance bill. It all seems to have become a part of normal daily living. We pay the minimum due, watch the balance go up, and put on a happy face because we’ve got it all.
Gerri Detweiler, author of Slash Your Debt, Save Money & Secure Your Future and founder of DebtConsolidationRx.com, notes,
Americans are pretty optimistic so it often takes a long time for a consumer to realize credit card debt is a problem. Most of us are counting on something to help us get rid of the debt quickly. It could be a raise, business income, even an inheritance or lottery ticket.
That’s what Chip and Shelley Smith of Midland, TX thought when they first got married. Happiness must at least partly come from keeping up with the Jones’s. But years later and upwards of $50,000 in credit card debt Shelley says they had nothing to show for it. They aren’t world travelers and they weren’t having any fun. It was the daily trips to Target and Pier One Imports for items they didn’t need but thought they might use one day that got them into trouble.
They finally woke up after attending a Dave Ramsey seminar and realizing the craziness of paying interest for pizza. After making changes in their lifestyle, selling lots of items on Ebay including family heirlooms, and working their way out of debt, Shelley now sleeps well at night free from wondering how to pay their bills.
You can sleep well too! Detweiler says if you have credit card balances running up with no idea how to make them start running down, if you have no idea how long it would take and how much it would cost to pay your balances off, or if you’re paying off a credit card with another credit card it’s time to get serious about your debt.
Create a Repayment Plan
This is the first important step in your journey because it lays out the path ahead. A repayment plan will clearly show you all your debts, how long it will take you to pay it off, and how much it will cost in interest and fees to pay it all back. It will also give you a good idea of what options you have. For example, Detweiler says if your plan shows it’s going to take more than 3-5 years to pay off your debt on your current budget, then it’s important to seriously consider debt counseling. Bankruptcy is also an option, but most consumer advocates stress that is should always be an absolute last resort.
For help on creating your plan, visit EveryDayWealth.com. The site offers everything from a personalized repayment plan to monthly credit reports, and ways to lower your finance and insurance costs, build better credit, monitor and protect your assets, and optimize your bill payments.
Finding Money for Your Payments
It’s time consuming and costly to try getting out of credit card debt by paying only the minimum, especially if you continue to charge purchases. But at times it can feel almost impossible to find the extra money to be able to pay more. Here are some tips to help you get started.
The "B Word"
While it’s not most people’s favorite thing to do, taking one month to track every single penny you spend through a budget is an invaluable step in getting out of credit card debt. You’re sure to find areas where you can cut back. The biggest areas of overspending are food and transportation. Detweiler says she’s seen consumers discover they were paying $200 a month for pizza delivery or $160 a month at the office vending machine. Don’t be discouraged, however, if you only find $10 as any little bit can help reduce your debt.
After tracking spending for a month you may find it necessary to make a few lifestyle changes. It may not be easy, but the changes aren’t necessarily permanent either. Here are some ideas to get you started living a more moderate lifestyle.
- If you have good local public transportation or good bike routes, consider living with only one car. If you do need two cars consider a trade down, which could also lower your gas and insurance bills.
- Reduce your housing costs by setting the thermostat a little higher in the summer and a little lower in the winter. Or do you even have an extra room you could rent out? Maybe moving to a smaller place would save you money, assuming the savings outweighs the cost of moving. Perhaps it’s a matter of dropping some cable channels or living without Internet access at home.
- Cutting your food bill is one of the most effective ways to find extra money. Try not eating out as often, keep a price book, shop alone, eat a snack before grocery shopping, buy in season fruits and vegetables, eat less meat, and avoid cold cereal (hot cereal is cheaper and healthier).
Making minor lifestyle changes can help you achieve the new American dream—freedom from debt for all!
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Editor's Note: This article is the first in a two-part series containing tips on reducing credit card debt. Please click here to read the second article in this series.
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