If like many Australians you enjoyed the holidays relying on your credit card, you are probably starting to feel a little bit sorry for yourself right about now.
You might be wondering how you are going to pay off your debt. You might decide to slowly chip away at it over the next year, at which time the process repeats itself and on it goes.
But it doesn’t have to be that way, so here’s a 10 step plan to get your credit cards under control.
The 10 Step Plan:
Step One: Make the decision to get rid of your credit card and stick to it. Set yourself a goal to pay it off and get rid of the credit card once and for all.
Step Two: Apply for a debit card, this will mean you are using your own funds, instead of bank credit.
Step Three: Transfer your existing credit card debt to a card that has an offer of 0% interest on debt balances transferred to give you financial reprieve and help you pay it off much faster.
Step Four: Once you have successfully applied for the new credit card and your debt balance has been transferred, you will receive your new card in the mail – CUT IT UP! The card is only to hold the debt temporarily, not to use it for additional purchases. And don’t use your old cards either to build more debt!
Step Five: Things are probably going to be tight for a while, but you can make it work. Go through your budget and find areas where you can extract money to redirect towards paying off your credit card balance and also keep on top of bills.
The simplest of things will go a long way, like taking lunches to work; getting a better deal on your gas and electricity plan; have pot luck dinners with friends instead of going out for a few weekends; put a temporary stop on direct debits for services you hardly use like pay TV and gym memberships.
Step Six: Find some ways to bring in some extra cash in to help you stay on top of things while you are still in a transitional period.
You could possibly do overtime at work, get a weekend job, mow lawns, walk dogs, babysit, have a garage sale or sell unwanted items on eBay or Gumtree. Get a roomie, rent out your garage, or make use of a talent such as teaching piano or tutoring English etc.
Step Seven: Once all your bills are paid and you have taken out your living expenses each pay day, divide your surplus income 60/40%. 60% you pay directly onto your credit card and put the other 40% in a high interest savings account.
Then, if something does come up and you need money quickly, you can access the money in the savings account.
This will help you change your habit from using credit cards to pay for what you need by using your own savings. You will feel much more in control of your money, and of course have a much greater appreciation for the money you save yourself.
Step Eight: At some point you will get to the stage where you have enough money in your savings account to pay out your credit card if you wanted to. It’s your decision, but just make sure to leave yourself with a little bit of a buffer.
Step Nine: Once you have paid off your credit card, call the issuer and cancel the credit card. This might require a letter in writing sent to them.
Step Ten: Congratulations! You now have no credit card, and money in the bank! Now you have all the money you would have put onto your credit card each month in surplus – make sure you continue to put the money you would have spent into your high interest savings account – no excuses. You managed this long – you can keep it up, and you will always have money in the bank for when you need it.
Source: Yahoo Finance