You gotta love America´s education system: 12 years of primary and secondary schooling and most of us never learned to budget our money. It´s not rocket science, but it´s one of those things that just aren´t very fun, almost like starting a diet plan or attending traffic school.
What´s more, many banks and credit card companies pounded consumers with aggressive marketing campaigns to try to convince them to sign up for their cards, oftentimes using an assortment of gift incentives and bonus reward programs. So don´t feel bad if you got yourself into a credit card nightmare. You´re certainly not alone. But what´s important now is to figure out a plan to get out of debt.
Here are seven easy steps to jumpstart your debt reduction plan.
Step 1: Make a list, check it twice
Get a blank piece of paper. On the left hand side, write down how much money you earn each month. For spouses, this may include both of your “take home” payment amounts. On the right hand side, list of all your credit cards along with interest rates and balances. This includes both bank cards and department store credit cards.
Now, draw a circle around the credit card with the lowest balance. (You´ll see why in Step 4 below.)
Step 2: Do the math
Then, determine just how much extra money you have at the end of the month after you pay your minimum balances on your credit cards and cover any other living expenses, such as rent, groceries and utilities.
Step 3: Brainstorm
Next, come up with some clever ways you can save money each month, so you can increase the amount left over each month. For example, cut out your daily trip to Starbucks and replace it with some really nice gourmet coffee you can brew at home. Or perhaps, bring your lunch to work a couple of days a week. After all, it´s just lunch. Or consider renting a DVD instead of taking everyone out to the movies. You may be pleasantly surprised when you see how much money you can save simply by cutting out a few things.
Step 4: Take control
Take all the money you saved in Step 3 and use it to pay down the credit card you circled in Step 1. Do this every month until that credit card is paid off. Then, circle the “new” lowest balance card and repeat the process.
Step 5: Pick one
We should mention that some financial experts recommend you choose the card with the highest interest rate. However, there is an added motivational boost to paying off the card with the lowest balance. Yet, whatever works best for you, pick one. If the card with the highest interest rate also happens to be the one with the lowest balance, that´s even better.
Step 6: Scratch and Repeat
After you´ve paid off your first card, scratch that off the list and determine the next card to target. Repeat these six steps and stick to your plan. Each time you pay off one of your cards, you will feel better and better about your debt situation.
Of course, while you are whittling away at your debt and singing a happy tune, it´s important to note that you should refrain from building up your credit cards balances once they are paid off.
During this process, at certain intervals, maybe every three months or so, it´s a good idea to check your credit report to make sure the balance on the card you are targeting is dropping. Also, while you´re at it, check your report for any new cards that you have not authorized, as this is a potential sign of identity theft.
Finally, if you keep your inactive credit cards with zero balances open, assuming you don´t have to pay an annual fee, this will keep your credit score from dipping.
Using these steps, you can get out of debt and eventually start saving that extra money or investing it for other things. Stay with it! You will be glad you did.
Taken from FreeCreditReport.com
Until Next Time,
Jeane' Elliott Bennett