This economic recession has been a good thing for many people even though it’s been hard to go through. Many folks are looking for ways to pay off credit card debt, become debt-free and start saving more, which is a great thing.
It can be a little overwhelming if you’ve been thinking about developing a plan to get out of credit card debt.
It’s important to remember that eliminating credit card debt or getting out of debt period is always simple, but rarely – if ever – easy.
So, what should you do if you want to get on the path to debt freedom?
Take a look at these steps:
Take Inventory of Your Current Situation
Gather each credit card statement and write down the name of the card, the balance, interest rate, minimum payment due and the amount you are currently paying toward that debt.
If you’re married, this should be done with your spouse. After all, managing your finances is a joint venture.
You would be amazed at how many couples I come across that do not know that the other one has credit card debt or are unaware at how bad the problem is.
Most financial plans start with this piece of advice. If there’s one thing you must do to get ahead financially it’s to spend less than you make or make more than you spend.
I tend to focus on expenses first because it’s often easier to cut back than to make more money. Making more money can be done, but requires a little more time and energy.
Call to Negotiate Your Credit Card Debt
I am amazed at how often this is overlooked. Many companies are willing to work with you if you approach them and let them know that you are wanting to pay off your debt, especially in this economy, where many people are not paying their bills at all.
Depending on your history with them, you might be able to negotiate lower rates and better terms.
I suggest calling your card company and be honest with them. I would ask for a manager right away or an account closing specialist so that you get straight to the decision-maker that can help you.
Let them know your situation and ask them if they can reduce the interest rate for you.
If they are unwilling to help you, get transferred to the account closing specialist and let them know that you will transfer the balance to another company if they cannot work with you.
You should be prepared to have some balance transfer offers in hand to follow through on this and consolidate your credit card debt as well.
Snowball the Debt
Some people believe you should pay off your highest interest card first. I tend to disagree.
I think snowballing your debt is more of a confidence builder and can start some fast momentum towards getting you out of debt.
According to Dave Ramsey the best way to knock out debt is to get some quick wins under your belt because “personal finance is 20% head knowledge and 80% behavior!”
The first step in snowballing your debt is to pay minimum payments on all your credit cards except the one with the lowest balance.
You pay as much as you can on that amount until that debt is gone and then you take whatever that payment was and apply that towards the next smallest balance.
Each time you pay off a debt, apply that payment to the next smallest card and before you know it you will have created some great momentum and will see the progression at a more rapid pace.
Get Some Accountability
Getting out of credit card debt is not easy and it won’t happen over night. It will take discipline, sacrifice and patience, but the results will be worthwhile.
This is why you need to find someone who can keep you accountable for your goals. Whether it be a financial coach, financial advisor, a friend or family member, a pastor at church – it doesn’t matter who so much as it does getting someone to do it.
They’ll encourage you when you want to give up and they’ll hold you to what you’ve committed to do.