Getting Out of Debt in 8 Simple Steps
As of right now, average Americans are carrying almost $700 million in revolving credit card debt. Honestly, we don’t even charge that much. That’s just the interest on our outstanding balances! Using credit cards is nothing more than a habit. Habits can be broken.
Think about it this way: the majority of credit card users never pay the entire balance of their cards every month while some can’t even make the minimum payment. Wouldn’t it save you money if you didn’t have credit card debt at all? If you change your spending habits you can be the first to find out! Here are 8 easy steps to follow:
1. The Dreaded List
When you write things down, things have a way of becoming more concrete. Collect all of your credit card statements and write down all of your balances, the minimum payment, and the interest rate. Just looking at the numbers might deter you from using your credit cards.
It may seem like the most obvious, but pay off the smaller cards with the highest rates first. You might be able to pay off a card in one month and free up the subsequent money to pay off another bill!
3. Don’t Balance, Roll
Rolling your balances from card to card isn’t the smartest thing to do to save yourself money and to get out of debt. All it does is lull you with false confidence and make you think you’re getting out of debt when you aren’t. Just remember: when you apply for more cards the possibility arises that your credit score will go down from the frequent inquiries. Since it is so important to keep your credit score up, it might make you think twice before rolling your balance.
4. Close Paid Off Accounts
After you’ve achieved your goal and paid off a card, call the issuer and have them cancel it. You really only need one credit card for emergency situations anyway. If you leave them open, they’ll still show up on your credit report as money you’re potentially able to spend. Some lenders look down on this.
5. Credit Reports
Always try and obtain a copy of your credit report. Scrutinize it with a fine toothed comb and make sure it is free from error. You’d be surprised how many errors show up on credit reports yearly. This will save you money if you ever go for a home or car loan.
6. Set a Budget
Budget seems like a terrible word, but it can be extremely helpful in getting you out of debt. If you can stick to your budget for long enough, you’ll see they payoff: debt free!
7. Home Equity
Many people are dipping into their home equity for frivolous and unnecessary expenditures like vacations, state of the art electronics, etc. This can only hurt you in the long run. Make sure that your equity stays intact for use on wise investments and not things that will depreciate in value.
The more you read about finance and credit, the better educated you will be. The more educated you are, the less likely you are to make mistakes that can cost you thousands of dollars later on in life. The more you read, the more likely you are to be debt free!