Do you feel trapped in the never-ending cycle of credit card debt? Credit cards are very popular because they are easy-to-use and give you the freedom to make purchases without having cash readily available. The problem is that you may end up taking months, or even years, to pay off your purchases, and you are going to pay a substantial amount in interest. This is especially true if you only make the minimum payments on your credit cards each month. First tip, if you are trying to figure out how to survive on minimum wage then it is probably best that you stay awa from credit card use entirely.
If you feel like you are never going to get out from under all of this debt, there are effective steps you can take to get out and stay out of debt. Below is a look at several steps you can take today to get out of debt and a list of tips to help you avoid using your credit card and going back into debt again.
Getting Out of Debt
The first step to getting out of debt is to make a commitment to take control of your finances and make the sacrifices necessary to pay off all your credit card balances. Next, you need to set a household budget that tracks how much income you have coming in and what expenses you have going out. Review your household budget carefully and look for ways you can cut your expenses. Use this extra money to pay off your credit cards one at a time staring with the card with the highest interest payment. If possible, you can also roll over all your balances onto one low-interest credit card or take out a debt consolidation loan. This will give you only one payment a month and save you money on interest over time.
Staying Out of Debt
No plan for getting out of debt is complete with a comprehensive strategy for staying out of debt in the future. Below are some proven tips to help you avoid going into credit card debt again.
- Make a decision to get rid of all of your credit cards, except maybe one that you can use only for emergencies. By getting rid of your credit cards, you will eliminate the risk of using them.
- Take the money you were using to pay off your credit card debt and now place it into a savings account.
- Build up your savings account to cover between three to six months of your salary. This money should be set aside as an emergency fund in case you ever lose your job or are unable to work due to an illness or injury. This added protection can help you avoid going into debt again if you ever have a loss of wages for an extended period of time.
- Make a clear distinction between your wants and your needs. Your needs should become part of your household budget, whereas you wants should only be purchased once you have saved enough money to purchase them with cash.
- Leave your credit card at home when you go shopping. This will avoid impulsive spending and help you stay within your spending limit.
- If you decide to keep one credit card, pay as much of the balance off each month as you can afford and never only pay the minimum balance because you will pay more in interest. Also, refrain from withdrawing cash with a credit card because most credit cards charge extra for this service.
- Be wary of consolidation loans or balance transfers, these can be great options but only if you are committed to staying out of debt and not using the cards that you just paid off.
These tips will help you get out of debt and learn how to avoid going into debt again. This will help you save money because you will not be paying any interest fees, which makes more money available to you to purchase the things you want. Over time, you will be able to build up a savings fund that you can use to borrow from when emergencies occur, or when you want to make a purchase that is not included in your household budget. Then you can just rebuild your savings account back up versus paying a lender back.