Credit card debt adds up quickly if you're not careful. Sometimes it’s life circumstances, sometimes it’s lack of personal responsibility, and other times it’s a combination of both. The first thing to examine is what lead you into credit card debt.
Did you start a business that isn't going so well? Did you simply spend outside of your means? If so, why? What motivated this behavior?
Understand how you got to where you are now. If you don't have a grip on this, these forces, invisible to you, can undermine what you're trying to achieve.
Knowing the circumstances that got you to where you are now is important. Because while your circumstances can be limiting, many of us are capable of changing our circumstances. Especially the lucky ones.
This is not easy. This takes a lot of work. And most of us are not willing to do this work. You have to look at things from various perspectives. You have to be honest with yourself and what you are capable and incapable of. You might have to beat the odds. You might have to claw your way out of the statistic that you could easily become.
Understanding your circumstances informs your plan to pay off the debt.
Step 1: Alter the Equation
The equation I'm talking about is the income - expenses equation. Either by luck or through personal responsibility, you have to earn more, spend less or both.
How did you get into debt? Is it possible, through your own efforts, to get out of it and stay out of it by spending less and/or earning more?
Do you need a roommate to reduce rent expenses? Do you need to take public transportation because a new car isn't in the cards for you? Do you need to look for a better paying job? Here's the million-dollar question: How can you consume less and create more in actual and perceived wealth? This is the work I was talking about.
Step 2: Make a Plan
First, figure out how much you can afford to put towards your credit card debt each month.
Use this debt calculator to help you create an optimized payment plan to minimize interest and get debt free as fast as possible.
It's important to make a plan first. If it's realistic, then as long as you're consistent and keep current with your plan, you'll see a light at the end of the tunnel.
Everyone's plan will be simple and the same: every month pay more than the minimum you owe. In other words, attack your debt by using as much extra money towards paying down debt. Simple, but not easy. The tool helps make it easier.
Make a plan. Make a plan. Make a plan
Step 3: Research Other Options
If you made a plan and it's not realistic or you want to get out of credit card debt faster, then you have a couple of options.
You can refinance your debt on your own. Refinancing your debt is the same thing as debt consolidation. You get a loan for the total amount that you owe for your credit cards. Getting a personal loan from the bank is one option.
You then use that loan to pay off your credit cards. The idea here is that you find a loan with better terms. Usually better terms means a lower interest rate or a fixed monthly payment or you get out of debt faster than you would have otherwise.
Step 4: Be Consistent
Yeah, this step sucks. I know. It's all the behind-the-scenes work that needs to be done in order to have the fleeting moment of glory. Think about it. You're probably good at something. Think about that thing you're good at. To get good at it, to create a result, you need to show up and be consistent.
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