Now
For Some Great Advice
This
advice will benefit those who are not yet at the stage where
a drastic Debt Elimination plan is required and want
to be sure their situation gets back on track before it gets
worse. The first step to gaining control of your financial situation
is to eliminate Credit Card debts and then to prepare a Budget
that works and keeps your debt from creeping up.
To
Pay off those Credit Cards and Stay Out of Debt
COMPLETELY
ELIMINATE YOUR CREDIT CARD DEBT
Don’t
wait until you are too deep into a financial problem before
you decide to take control of you financial future. If you still
have the luxury of time to solve a looming financial problem
(still managing the minimum payments and able to devote a little
more each month) then roll up your sleeves and take charge.
Start by tackling your Credit Card Debts. You may even consider
finding another source of income while on a planned and structured
Debt Reduction program.
Note:
The following strategy may only be effective for accounts not
currently in arrears or collection and where your household
has sufficient income to increase monthly payments beyond “Minimum”
payments
By
following the Debt Reduction Pyramid Strategy, anyone
can take control of and completely eliminate credit card debt.
Credit
card debt is the most cunning adversary to securing your financial
future. Unfortunately, many people obtain credit cards while
still in school. Credit card companies use enticing promotions
to lure consumers by increasing credit limits and offering pre-approval.
All of these strategies attempt to install the habit of spending
now and paying later.
Many
people don’t realize how destructive this habit is, until their
credit card payments become the largest part of their monthly
budget. Credit card debt, as a percentage of income, has been
on the rise for the past two decades. It may be difficult to
break the habit of using credit cards; however, the reward is
worth the effort. A debt-reduction strategy called The Debt
Reduction Pyramid. Will enable you to completely pay off
your credit card balances.
The
Debt Reduction Pyramid is designed to help you pay off your
balances quickly and painlessly. This strategy is the same as
if you tear down a pyramid. If you did this, where would you
start? The most logical place is the tip, since the foundation
is so enormous. You would begin at the top, removing one brick
at a time until the entire pyramid is torn down. Thus, you will
pay off your balances, one payment at a time. There are four
simple steps to follow. These steps include:
STEP
ONE:
The
first step of this strategy involves writing down all outstanding
credit card balances in ascending order (smallest to largest).
This is referred to as the Debt Pyramid.
STEP
TWO:
The
second step of the strategy is to concentrate on completely
paying off the lowest balance. By paying off the lowest credit
card balance, the top of the debt pyramid is eliminated. In
addition to the minimum monthly requirement, you should pay
as much as possible over and above the minimum. For example,
if the minimum monthly payment is $40 on the smallest balance,
a check could be written for $75. ($40 minimum required plus
an additional $35) Pay this extra amount every month until the
entire balance of the first card is paid off.
STEP
THREE:
Once
the lowest card is completely paid off, concentrate on the second
position. After the credit card balance at the tip of the pyramid
is paid off, add the minimum monthly payment of the first card
to the minimum monthly payment of the second smallest credit
card. For example, if the minimum payment on the first position
was $40 and the payment for the second card is $55, then your
monthly payment to the second credit card would be $95 ($40
+$55 = $95). The benefit of using this step is that the minimum
payments are already allocated into your budget. Thus, no additional
money is reallocated to pay off outstanding debt.
STEP
FOUR:
Continue
using this strategy until all credit cards are completely paid
off.
IDEA
FOR HOW TO STOP USING CREDIT CARDS
Once
you begin conquering your credit card balances, the worst thing
to do is to begin using them again. Here are four ideas to follow
to stop using plastic:
Lock
Up or Cut Up Any Credit Cards:
One
of the best ways to stop using credit cards is to not carry
them. However, everyone should have access to at least one card
in case of an emergency. There may be times when a large amount
of money is needed immediately. For example: to purchase an
airline ticket in a family emergency or rent a car. An innovative
way to remind yourself of this is tape a piece a paper on each
card with the words: “FOR EMERGENCY USE ONLY”.
Write
Checks: Get in the habit of writing checks:
This
offers two advantages: The first benefit is you can’t make a
purchase unless the money is in the account. This may eliminate
frivolous spending. The other advantage is it will wean you
out of the credit card habit.
Use
Debit Cards:
A
debit card is similar to a credit card with one distinct difference.
Whenever you make a purchase, money is subtracted from your
account. You cannot spend more than what is in your account.
Put
a Reward System in Place:
Every
time a credit card is paid off, treat yourself to a long walk
on the beach or a dinner out, but not a shopping spree to put
you in more debt.
By
following the Debt Reduction Pyramid Strategy, anyone
can take control of and completely eliminate credit card debt.
Note: This strategy may only be effective for accounts not currently
in arrears or collection and where your household has sufficient
income to increase monthly payments beyond “Minimum” payments
To
Stay out of Debt
Develop
a Budget:
The first step toward taking control of your financial situation
is to do a realistic assessment of how much money comes in and
how much money you spend. Start by listing your income from
all sources. Then, list your "fixed" expenses — those
that are the same each month — such as your mortgage payments
or your rent, car payments, or insurance premiums. Next, list
the expenses that vary, such as entertainment, recreation, or
clothing. Writing down all your expenses — even those that seem
insignificant — is a helpful way to track your spending patterns,
identify the expenses that are necessary, and prioritize the
rest. The goal is to make sure you can make ends meet on the
basics: housing, food, health care, insurance, and education.
Your
public library has information about budgeting and money management
techniques. Low cost budget counseling services that can help
you analyze your income and expenses and develop budget and
spending plans also are available in most communities. Check
your Yellow Pages or contact your local bank or consumer protection
office for information about them. In addition, many universities,
military bases, credit unions, and housing authorities operate
nonprofit counseling programs.
