If your mounting credit card debt is giving you sleepless nights and preventing you from realizing your dreams, then shutting your eyes to the problem is not going to make it go away. With a great amount of determination and some very practical strategies, it is very much possible to get on top of the problem and get back to a worry-free life that you always wanted. What’s more, you can make this happen all by yourself without any professional help. Here’s how you can become debt-free:
Make a Commitment
Even though it might sound a little silly, making a commitment to get out of debt is among the most important things to do. Not only does it require enduring discipline, it also requires you to make changes in your lifestyle. Get your family on board else it is not possible to get out of debt if the rest are shopping like crazy. It helps to keep a photo of something you are aiming for like a car or a holiday so that you stay motivated.
Know What You Owe
Make a list of all your credit card outstanding, including the applicable interest rates and the minimum amount payable every month. It helps to do this on a computer spreadsheet so that you can keep on updating it as you make the payments. When you know the minimum amount, you know exactly the amount that you must set aside every month. Knowing the rate of interest helps you to prioritize your repayments. Make it a point to pay off the debt with the highest rate as you can minimize your interest outgo this way.
Try and Get a Zero Percent Balance Transfer
Trawl the web to see if you qualify for a credit card that will offer you a zero percent balance transfer facility as then you can consolidate all your other card balances into this one and make the most of the moratorium period. Try to get a card that offers you the maximum period, and make every attempt to pay off the debt before the interest-free term ends; otherwise, you will again start paying a very high rate of interest.
Negotiate APRs or Attempt Refinancing
If you cannot access a zero percent card or if the math doesn’t work out, try talking to your credit card issuers to bring down the applicable interest rate. If your principal debt is a mortgage or a student loan, explore the possibility of refinancing it at a lower rate. However, you should keep your focus on not defaulting as that would impact your credit score. There are a lot of websites that can help you to find out details of refinancing opportunities.
Track Your Spending
The only way you can pay off your accumulated debt is by finding enough money to do so. Unless you know where your income goes, there’s no way you can start to plan where to cut down. There are a number of online solutions and smartphone apps that can categorize your expenditure so that you can trim your expenses. Start off by cutting on the really big expenses that are not essential such as dining and entertainment. Get rid of monthly subscriptions for facilities that you never seem to use and keep a sharp eye out for discounts and coupons.
Make A Monthly and Annual Budget
List out your annual or monthly income, take into account the deductions made for taxes and retirement contributions to arrive at the sum you have for spending. Again make a list of the monthly expenses, including that spent on housing, conveyance, education, groceries, and utilities. Try and cut all discretionary and luxury expenditure and see what amount you are left with. Do whatever you can to ensure that your expenses are less than half of your income. Enforce strict discipline so that you do not end up frittering away your savings.
Commence Your Debt-Repayment Plan
Ensure you pay the monthly minimum of all your credit cards so as to avoid penal charges for missed or late payments. Whatever surplus money you have thereafter should be used to pay off the debt with the highest interest rate till it is extinguished. After that, use the entire surplus to attack the next debt on the list and carry on till you repay all the outstanding.
Author bio: Michael Hogg is a personal finance consultant and a regular contributor to several online finance websites.