It seems so great: in one little rectangular piece of plastic, you have access to over $2,000 in funds. Run it up, and they’ll increase that line of credit to over $10,000. It’s like being rewarded to spend. Too good to be true, right?
Well, yes. It is.
In my early twenties and a year out of college, I am trying to conquer my credit demons, which keep me up at night, and constantly broke. I have accepted my situation that every paycheck is not really money in the bank: it is money immediately handed over to Visa, to keep me from having to fork them over even more money in the future in interest. I know that I am not alone in this battle to regain financial independence and debt freedom: statistics say that Americans have a national average of more than $9,000 in credit card debt.
We all know how it happens, and we all regret it now, and wished we had listened to the old timers that warned us not to spend money we don’t have. But they are such an easy thing to obtain these days, with five applications and pre approval letters coming every week in the mail (and much more, if you manage to get yourself indebted deep.) And the credit card companies work a little like big tabacco, hunting for the naive and the ignorant, who “just want to look cool.” You see them on every college campus, trying to hand out their supposed financial gifts to poor college students who want cool jeans, and have no jobs. Then the selfsame college students use the card for open tabs at bars, more jeans, shoes, books, ect. And soon, you are a poor college student with thousands of dollars in debt.
However you amassed your own debt is unimportant now: what is important is getting yourself out. it’s going to take some time, sacrifices, and a lot of discipline.
The first thing to do is to stop the madness. NO MORE SPENDING. You’ll find that it’s always easier to spend more than you pay. That’s why you got the card in the first place. That’s why you’re in the mess your in now. Cut them up, take them out of your wallet and leave them someplace safe at home- I don’t care what you do with them, as long as you don’t use them to buy anything else with. If you are making a one hundred dollar payment/month on your credit card, just two trips to the grocery store will cancel any headway you might make with that payment. It’s time to focus on paying your monthly expenses solely from your checking account.
You have to make more than the minimum payment if you are going to make headway towards a zero balance. Usually a lot more. Interest rates will make those minimum payments come out to just short of nothing. Remember, credit cards are in the business of making a lot of money from you. A repayment plan structured by them is not going to be in your best interest- it will be in theirs. They don’t care how much you spend, as long as you don’t pay it back all at once. Make mimimum payments on student loans; their interest rates are practically non-existant. Your primary focus should be the credit card.
Lose the denial, and learn to love the art of denying. You’re just going to have to walk away from the things you want at times, I’m afraid. Vacations, new clothes, expensive restaurants…these are not tailored to your budget, so don’t make them part of your lifetsyle. You might live the life of a big spender, but guess what? You can’t afford to. It’s time to check yourself, and ask whether the fleeting exhaltation of splurging is really worth all the hours of worrying about it later. You might decide to get even more serious about being debtfree, and pick up a part time job with a pay check used specifically for additional payment amounts. It might seem like a lot of work, but remember that the quicker you get your balance down, the more you will save on huge interest amounts.
Cut back where you can. These days, a cell phone is all you need. Lose your home phone, and put that money towards bills. Don’t renew magazine subscriptions. Make coffee at home. Don’t get a pet until you are more financially secure (unforeseen vet visits can be in the thousands, and even a healthy pet costs a lot to feed and vaccinate.) Don’t fequent bars, and blow your next payment on ten dollar martinis. Lose the gym membership, and try running outdoors, tennis at public courts, or a cheaper YMCA membership. Rent movies instead of going out. Yes, all these options don’t sound like as fun as the more expensive ones. But you really need to work on your self discipline, and be aware of where your money has been going in the past. A sense of humility will help you train yourself to be better with money.
Check into consolidation. You can help save money on interest rates. If you have access to a private loan with lower interest rates, do so immediately. Start keeping track of your checkbook. With online banking, almost no one bothers balancing checkbooks today, but it really helps you keep track of your spending, and ends the mystery of “where did that extra fifty dollars go?” Make payments ON TIME every time, so as to avoid late fee charges, which is the last thing you need now. And keep track of those credit card statements, as much as you’d like to pretend they don’t exist. You can despute small charges or fees that somehow find their way in your account. Enroll in online bill pay for every card you have. This way, you can ensure that you won’t lose a bill and incur a fee, and it keeps track of all billing dealines for you. Plus, you can schedule all your payments at once, and not worry about it until the next month. Furthermore, if you do get a little extra cash later in the month, you can go ahead and make an additional payment instead of waiting for your next statement. I’ve found that online bill pay has really helped my organization – and it saves money on checks.
Digging yourself out will take a lot of introspectiveness on your own part. You are going to have to really reevaluate your money handling abilities and tendancies. Sometimes, seeing a consultant at your bank, or attending a free finance convention can really inspire you to change your ways. It will definitely require work and discipline, but the sooner you get on it, the sooner you can stop worrying about it – and the less you’ll have to pay in the long run.