Credit card debt is no joke. For some of us, just the thought is enough to ruin sleep. Fighting credit card debt seems impossible for many of us. We are discouraged about our financial situation and have so many lousy spending habits we can't even think of where to begin. Sometimes we can't even imagine what it might be like to be out of debt. It doesn't have to be this way. There is hope, and we can find ways to pay off debt and live better, freer lives because of it. The fact that you're reading this article is proof that you have begun or have been working on becoming debt-free. Knowing where to start and how to start paying down debt is the key to victory. There are many methods you can employ to conquer your debt.
Start with a Budget
Your budget will be your map. To start this journey without a budget is to set sail without a destination. An adequately built budget will illuminate your finances, showing you the cold hard truth of the numbers. For many people, this will be the first time they have seen their finances laid bare—a grim prospect for some of us, but a necessary one. It would be best if you had a realistic picture of your finances to make informed choices. Learn more about building a budget here.
The first order of business when trying to pay down credit card debt is to stop using it. Move to cash use, if possible. Using cash will make you more conscious of your spending. Leaving the credit card at home can be all it takes to stop you from giving in to impulse purchases that are counterproductive to your long-term goals. Make every reasonable effort to avoid piling on any new debt.
Don't be tempted by rewards programs or low-interest rates. Did you know that credit cards are one of the most expensive ways to borrow money? There isn't a reward package out there worth the interest rate.
Focus on Why
Why do you want to be debt-free? I'll bet you have little trouble imagining a life much less stressful with more possibilities. The fear of looming debt no longer hanging over you like a shadow. Paying off your debt will likely take a long time, and it will test your dedication. Keeping a strong focus on why this is important will help keep you on track.
Choose a Strategy That Works
There are many strategies for tackling debt that work. The best one will ultimately be the one that you can do. The debt snowball, favored by financial guru, David Ramsey, is suitable for people who need the motivation to stay on course. The principle behind the strategy is to pay down the smallest debt first, throwing everything you can at it, while making minimum payments on the rest of your debt. Once your smallest debt is gone, take all the money you were paying into it and roll it over to the next lowest bill, and the next, and so on.
This strategy works well for people who need extra incentive to stick to the plan; watching your debts fall one by one and watching your snowball roll can be quite gratifying. Or consider the debt avalanche, which focuses on the highest interest rate debt instead of the smallest. This strategy will save you more money but provides less gratification, as starting with your most significant and most troublesome debts can be discouraging. There are many strategies, finding the one that works for you and your situation is critical.
Pay More Than the Minimum
As I mentioned above, if possible, you should pay more than the minimum payment. If you are serious about defeating your debt, you have to be aggressive. Paying more than the minimum payment will allow you to put more money on the principal, paying off your debt much faster and saving you money on interest.
Out with Old Spending Habits, In with New
Paying more than the minimum amount can be hard. Even if you have the money, the temptation to do something irresponsible can outweigh the desire to be debt-free. This is just one example of why you need to be killing old bad financial habits and building new habits.
Part of the process of building and implementing your budget should involve looking at your spending behaviors. The biggest issue with some methods of handling debt's 401k loans, equity loans, debt settlement, etc., is that they only address the symptoms, but do not address the root cause. None of these options – though useful tools in the right hands – can fix bad spending habits. Try to take a hard look at the spending habits that put you in this place and correct them.
It's not easy to admit it when your finances are out of control. Some of us might find ourselves in too deep. Financial advisors can help you get back on your feet by helping you build a plan and stick to it. Using their knowledge, they can help you create a realistic plan for paying off debt and saving for the future based on your goals.
Know Your Options
Some people need more immediate solutions like debt consolidation loans, home equity loans, or debt transfer. These options are helpful for people who find themselves in need of more immediate help in getting their debt under control.
These options can be useful for helping you get your debt into a manageable place if used correctly. Consider talking to a financial advisor or credit counselor about these options to see if they are the right choices for you.
Getting out of debt is hard. Sometimes it feels impossible. It's not impossible, but it does take hard work and sacrifice. No long-term change can be made to your financial situation if you are not ready to change yourself. The journey to becoming debt-free will test you. It may be one of the hardest things you undertake. It is worth it. Not only to have the chance to live a life with less stress and more financial freedom but also to cultivate the personal discipline, which will never stop severing you well.