Credit card debt can be overwhelming, when minimum payments seem high and there is just not enough money within the income to make all of the payments and pay for your day to day expenses. There are five steps that you can use to successfully overcome credit card debt,
Recognize the Debt
It is impossible to get out of credit card debt until the consumer realizes how dire the situation can be. Recognizing the debt and establishing amounts that owe to each creditor is the first step of the debt repayment process. Take a pen, paper and recent statements to tally up just how much debt has been accrued. Be sure to include credit card debt, personal debt with loans to friends and family members and any outstanding bills, loans and credit lines. Tallying it up is an eye opener which can often shock the card holder into beginning an aggressive debt repayment plan.
Put the credit cards away for this portion of the debt repayment plan. Whether you have to freeze the accounts with the credit card company or literally put the credit cards on ice – it is important to avoid accumulating any additional debt once the repayment plan has been started. After the credit cards have been put away it is time to establish a repayment plan!
Make a Plan to Repay the Credit Card Debt
A plan to repay the credit card debt can include the list that you have created in step one. In addition to these total amounts owing, calculate the amount that these debts are costing each month by multiplying the interest rate by the balance of the outstanding debt. Tally the list and arrange the debts from most expensive to least expensive. Number one is going to be the most expensive debt which you will repay first, when number one has been repaid you will work your way down the list repaying the same amount that you have established in the budget for debt repayment.
How do you know how much should be allocated towards debt repayment? For optimal results, fifteen percent of the income should be allocated towards debt repayment. Any less than fifteen percent and you could risk the debt taking over your life for years to come and any more could mean stress on other parts of the budget.
Create a Budget
A budget will need to be created that allows you to allocate fifteen percent of your income every single month towards debt repayment. This budget should include portions for fixed and variable expenses, savings as well as the debt repayment. Variable expenses are often cut in half when the consumer has been spending outside of their means to accumulate high levels of debt. Sacrifices now will mean financial preparedness later!
Stick to Your Budget and Repay the Credit Card Debt
Seeing statements arrive in the mail that outline the zero balance of the credit card are some of the most rewarding moments through the debt repayment process. Sticking to your budget will enable you to establish some sort of financial security and repay the debt while learning valuable personal finance skills that can help you in the future.