Five Steps to Escape the Bad Debt Basement
Though there are many different companies that peddle their services with miracle-promising jingles on TV, the best ways to rid yourself of credit card debt are often simple and lifestyle-oriented. So forget the television ads and the third-party quick fixes. All you have to do is walk up these five steps from the debt basement to the paid-off penthouse.
Step 1 - Eliminate Excess
For many people, debt simply arises because of spending that has overtaken available funds. Just as it may have seemed like a breeze to get into, ridding oneself of such debt is actually fairly simple. Though it is probably the logical option that everyone realizes in the back of their head but hopes isn’t true, all you have to do is avoid spending money on non-essentials. Remember that cable, smart phones and other gadgets, and even a car may not be essential. These are luxuries that have grown to be thought of as necessities, and though it may cause a tough adjustment, they need to be let go for your financial sake.
Provide food, shelter, clothing, healthcare and whatever else you absolutely cannot live without. Eliminate discretionary spending and the lavish. Avoid restaurants, movie theaters, travel-intensive vacations and the like for a period of time, and put the money saved toward your debt. Once it is paid off, you can resume normal, albeit more responsible, spending.
Step 2 – Strategic Allocation
Imagine you have three credit cards, each with a $50 minimum and $250 a month to put toward credit card payments. Rather than paying equal amounts to each, pay $150 to the card with the highest interest rate and the minimum to those remaining. This way you can pay the debt off each card one-by-one while minimizing interest damage. After all of the balances are eliminated, you will apply this monthly credit card allotment to car or mortgage payments until you are completely debt free.
Step 3 – Don’t fly below the minimum
Credit card companies do not differentiate between payments below the minimum amount required and no payment at all. If you make a payment below the minimum, you will still compile penalties and delinquency. So keep the money until you can at least afford to pay the minimum.
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