We're going to be talking about how to pay off your credit cards so you can finally be out of debt for good. I'll go over 8 steps to reduce your credit card debt.
1. Stop Spending Money On Your Credit Cards
Cut your card up if you have to or freeze it in a block of ice. Whatever you do just get it out of your reach, out of your wallet so you aren't tempted to spend on it when you're in a store. Keep in mind, that there is also online shopping, and cards are often saved in those online shopping carts. So make sure you go into the ones that are most tempting to you perhaps it's Amazon or Target or another online store and delete your credit card number from the shopping cart in that online shopping portal. This will ensure that you aren't adding to any balances and you can freeze your spending right here, right now.
2. Switch To An All-cash Budget
You can actually go to the ATM and take out the cash that you need to spend this week, or you can just use your debit card and you'll be seeing the money withdrawn from your bank account as you spend it. This again, will ensure that you're no longer adding to the balances on your credit cards, and those balances will stay the same, you can focus on paying those off and then your lifestyle and the expenses that you incur on a day-to-day and week-to-week basis, are going to have to fit into what money you actually have in your bank account
3. Call Up Your Credit Card Companies And Try To Negotiate A Lower Interest Rate
Oftentimes it works for you to call the company and threaten that you're going to close down the card. Most credit card companies don't want you to do that so they will try to negotiate with you. They can often reduce the annual fee that you're paying on the card which would be excellent, they can also possibly lower the interest rate. Now you're not actually going to close card because that can have a big impact on your credit score in a negative way, so don't do that, but try to negotiate and get that interest rate down because that means the lower amount of interest rate you pay, the lower amount of the money you're going to be paying in order to pay off your debt long-run. You can also use an honest approach and just tell them you're trying to get your debt under control, and it would be really helpful for you to get a lower rate and see if that will work too. But just use these different negotiation tactics to get that interest rate as low as possible on each of your cards
4. Get A Piece Of Paper Or A Spreadsheet And Write Down All Of Your Debts On Order Of Priority, And Priority Meaning, When You Want To Pay Them Off.
So the first set you have on the paper will be the first one you want to pay off. You can use different methods and debt payoff strategies to tackle your debt and that will determine which order you place them in. What you want to do is get your debts down in front of you so you get a full picture of what your debt looks like
You're going to write down the name of the people or the creditor that you owe money to, the amount of money you owe so that would be the balance. The interest rate tied to that debt, and then the minimum payment that you're required to make on that debt. You can also write down next to the minimum payment what the actual amount of money you're paying is, but make sure that you have minimum down because that is the number that you absolutely have to be paying towards each one of your credit cards in order to make sure you're ready to pay off your debt as soon as possible. Paying more is obviously a good thing, so go ahead and keep paying more if you can afford it. But, you need to make sure that you're making your minimum payments on all of your credit cards so you don't encounter any sort of fees or additional interests that could add to the amount of money that you owe.
5. Review Your Expenses And Try To Find Room In Your Budget To Make Additional Payments Towards Your Debt
Once you have your debts all written down then you're going to review your expenses and try to find room in your budget to make additional payments towards your debt. When you review your expenses you're going to look at a month or a couple months' worth of spending. So maybe you pull your credit cards or your bank account statements to see what money is going out, into what. You may have to make some temporary reductions in your spending, but this is only temporary while you work on paying off your debt. You can also make permanent reductions if you find ways that you can live on less without spending money and that is awesome too.
Sometimes debt reduction requires us to make some drastic changes, like moving from one place to a new one to have more affordable rent or driving a more affordable car. These are things that are lifestyle choices that you make, but if you can reduce the cost, you can free up a lot of money to pay down your debt even faster, so definitely consider some of these bigger changes as well.
6. Get Yourself On A Budget
Not only do you need to know how much money you have to put towards your debt, and how much of your expenses you can reduce, but you also need to know how much you're spending each and every day or week or month, and where you can find some savings in your budget so that you can put even more money towards your debt to significantly reduce It.
7. Build Up Your Other Accounts During Months That Are A Little Bit More Affordable
Throughout your entire process of paying off your debt, some months you're going to have more expensive things that come up in your life, and you're not gonna have what's left over to go towards debt or even to go into savings, but some months will be a little bit cheaper and you'll be able to put more money towards your debt and even more money towards your savings. We don't want to neglect to save for our, oshit moments, and putting money into our emergency savings, and we do know that with the holidays coming up once a year and wedding season coming up once a year, there are those more expensive months that come into play. So why not pre-save for it, so that the next time you have an expensive month you already have money in your savings that could cover some of these items that would otherwise drain your budget.
8. Put Extra Cash Flow Towards The Principal Your Debt
When you do find extra money in your budget, and you've already saved some money so you have extra money left over. Put that extra cash flow towards the principal of your debt. And you want to put it towards the principal on the first priority of your debt and then work from there. Once that first priority debt is gone, because you've been putting a ton of money into the principal balance and reducing that balance, you just move on to the next step. Now you're still making the minimum payments on all of your debts, but that first step gets all of the extra money and then you move on to the next
This will ensure you that you'll get some momentum under your belt, you'll see debts becoming eliminated off of your list, and it'll just feel good and you'll be motivated to continue to pay off your debt until you're finally debt-free
Bonus Tips
Find Some Extra Money
There are definitely many many ways to find additional sources of income, you can sell some of your things, you can freelance, you can turn one of your hobbies into a money-making activity and sell your services or your crafts, and with this additional income, you should be putting it directly towards the principle on all your debt. You're essentially making a second income and using that income to completely pay off your debt and if you can do this, and really focus, your debt will be gone before you know it.
Consolidate Or Refinance Your Debt, And Whether You Should Or Should Not Do Not That
I'm just going to touch on credit cards in this article, and that would be most people wonder if they should do a balance transfer of all of their credit cards to a 0% interest credit card. And I typically say, no. Reason being that my experience with my clients is that when they do once transferred to a 0% interest credit card, they are not forced to change their habits. Typically they transfer that balance, it sits on that credit card because they're not accumulating any interest and they go back to spending money on other credit cards and racking up the debt. Also, they're not motivated or have any pressure to pay off that balance because it's a 0% interest card
The downfall of these cards is that there's usually only a period of time where you get 0% interest, and then once that period comes to an end, that 0% can turn into over 20% interest. So now you have this balance on your card and suddenly it's accumulating at 20% interest because we didn't get to tackle it and pay off that debt. I typically like to keep debt separate as well because if you can see yourself conquering one with a smaller balance then you can move on to the next one, and it just helps you from a psychological perspective, see yourself gaining momentum, building these habits of not spending on any additional credit cards and really paying off that debt, and it's just a much better method and approach from us as human beings who are very emotional and emotionally attached to our money and need to see ourselves making progress.