1. OK, if you have “bottomed out” on debt, if you are really ready to make a change, then your first move must be putting money into a savings account. You are probably in “trouble” because you are lousy at saving money. If you maintain a financial lifestyle of spending more than you earn, then working to pay off debt is like putting a bandage on a broken leg: You’re “doing something,” but in no way is it going to help. The requirement that you save money out of current income applies to all who work for a living. If you don’t save, then all of the rest of this advice will be meaningless to you.
2. Stop using all of your credit cards–no exceptions. If you can’t pay cash for something, then you don’t need it. Cut them up if you must.
3. Make a plan–list each credit card balance and interest rate, then work on paying off the cards with the highest interest rates first–or, if it helps psychologically, pay off a low-balance card just to experience the victory. *Reminder – our RepaySMART Program™ is a complimentary program that has this strategy built in! Call us to schedule your review and get your complimentary plan
4. If you are getting a tax refund, if you get a bonus from work, or if you come into any other unexpected clot of money, pay it immediately on your credit card debt.
5. Pay more than the minimum every month on every card. Don’t be fooled: The credit card company is NOT doing you a favor by requiring only a small monthly payment.
6. Reduce the interest rate you are paying by calling each company and asking for a lower rate. Changing your interest rate from 20% to 12% is a pretty healthy 40% reduction. If you can effect this change, next look at consolidating other higher-rate balances into this card.
7. As a last resort, there may be circumstances where it makes sense to refinance your home to pay off credit card debt. The risk here is that you may just go out and run up more debt, making this the worst possible action you could take if you’re simply going to waste the monthly savings. The absolute key here is to use those savings to begin building your savings and financial safety. Often times we can connect you with trusted financial planners who will help by becoming accountability partners to you, along with us, and create a system for you to save consistently and grow your nest egg.
Following these suggestions just might constitute the beginning steps on your pathway toward financial health. Our passion is to help be the catalyst for this bigger, better future!