Have you maxed out your credit cards? Here’s what you can do
Getting out of credit card debt will take some planning, dedication, and a little sacrifice, but you can do it. And when you do, you will have established great habits that will carry you into a solid financial future.
The following strategies will get you on the right path.
Put a Freeze on Charging
You cannot borrow your way out of a debt problem. Do not apply for any additional credit cards. You also need to stop using the cards you have, even when the balances start to go down. Some people literally put a freeze on their charging by putting the cards into a container of water and putting it in the freezer. That way, the cards can’t be used on a whim. By the time they thaw out, you will have hopefully come to your senses.
Figure Out a Budget
If your cards are maxed out, then you have been living beyond your means and buying things you cannot afford. In order to get back on track, you need to have a budget. Write down all of your necessary expenses: shelter, utilities, food, insurance, transportation, and other needs. Cut out the extras, like entertainment and eating out. Your baseline budget should only include your basic needs and debt payments (click here for more tips).
Once you have your baseline budget, add a small amount for fun. If you try to drastically change your lifestyle all at once and completely deprive yourself of all fun, you will have a hard time sticking to it. By giving yourself a small budget for extras, you will be more likely to stay on track.
Supplement Your Income
If you are overspending, the problem may be that you need more money coming in. Consider getting a part-time job to bring in some extra cash. Go through your belongings and find stuff that you can sell in a yard sale or online auction. Maybe you could babysit for a neighbor or friend. Get creative with ways to earn a little extra money.
In addition to earning more, you should also find ways to save money. Try renegotiating some of your monthly expenses, such as your insurance or cell phone plan. Reduce your grocery spending by clipping coupons and shopping for sale items. Do a little research to find other ways to live frugally, and you may find you don’t even need to supplement your income because you can get by on less.
Start a Savings Account
If you’re trying to pay off your credit cards, the suggestion to put away some savings may seem counterintuitive. But you are trying to get away from the charging habit, and life happens. When those unexpected emergencies pop up, you will need a little money set aside to deal with them, so you don’t have to break out the plastic again.
Communication with Your Creditors Is Key
Let your creditors know your situation. If your payments are too high and you are in danger of not being able to pay them, it is important that you give the card issuer a call and try to negotiate the terms of repayment. Sometimes you can get a better interest rate or work out a more manageable payment plan.
Creditors are used to dealing with situations like yours, and they are there to help you. They want to get their money, and they know that the best way to do that is to make repayment possible for you. They do not want you to default any more than you do because then they won’t get paid.
Plan Your Escape from Debt
Now it’s time to come up with a strategy for paying off your cards. There are many ways to go about doing it. Some people like to pay off the smallest balance first, in order to see results sooner. Some people like to pay off the card with the highest interest rate first. Whatever your plan of attack, the important thing is to have one.
Once you pay off one card, you can take the money you were using for that payment and apply it to other debts. Before you know it, you will be debt free.
Being in debt is stressful, but following these suggestion will get you on your way to paying off those credit cards. Once you reach your goal, you will be in the habit of staying within your budget, and you can put the extra money into savings or investments.