Beating Debt – Reduce Credit Card Debt
Q: What is the first step in dealing with debt?
A: Most people who go deeply into debt have no idea how much they spend on groceries, entertainment, clothes, or restaurants every month. Not knowing the state of your finances is like driving with a bag over your head.
It’s uncomfortable, but at some point, you need to look. Take stock of your financial situation. This will allow you to take the bag off and get a good look at where you are going financially. If you don’t like what you see, make some changes.
Q: Does that mean I have to make a budget?
A: Maybe budget is a bad word to use, or the wrong word. “Plan” is more of what we are talking about here. You need to come up with a plan that lets you see what comes in, what goes out, and what you want to go out.
And it’s easy to do. For example, maybe you will decide that you would like to spend $200 a month on entertainment (it is your budget, after all). The first part of the plan would be to simply to find out what you normally spend on entertainment. So for the whole month, you would spend money as you usually would, keeping close track of your entertainment expenses.
At the end of the month you would add up those expenses and see what you spent. If it was $300, that would be valuable information to have, would it not? You could then decide that you want to spend $300 a month the next month and cut back somewhere else, or you might decide to watch your entertainment spending more closely. Maybe you had no idea that you were spending $300 a month on entertainment. Either way, the budget, the plan, is working for you, not against you. It takes the blindfold off, see?
Q: I am drowning in credit card debt – what do I do?
A: The credit card trap is especially harmful financially. You know what the credit card trap is, don’t you? Charging, taking cash advances, getting stuck with a huge bill, and then paying only interest every month ensures that the balance is never paid off. It’s a trap because you are caught in a predicament that is difficult to get out of.
Many people get their bill, look at the minimum amount due and pay that amount. This is the absolute biggest mistake you can make with credit cards. Minimum payments can stretch your payments on forever and guarantee that you will pay for what you bought many times over.
The key to getting out of the trap is paying more than the minimum payment due — as much more as you can afford. The second trick is to transfer the balances on your cards with high interest rates to a card or cards with a much lower rate.
Q: Are any credit cards better than others?
A: Introductory rates are generally best. Locate a card that you do not have yet that offers a low introductory rate. When you get the new card, do not charge with it. Transfer your high balances onto it and use its introductory rate to your advantage.
What you have to be especially conscious of is how long the rate is good, a fact often buried in the fine print. Sometimes these rates can last up to a year; other cards may only offer them for three months.
Before applying for a new card, check to see if there will be any charges for balance transfers. If so, find another card. You should also double-check the limit on the card and be sure not to transfer more than that amount onto the card.
Q: What else can I do?
A: In addition to setting a realistic budget and avoiding the credit card trap, you need a debt reduction plan. Now before you even say that you can’t, that it’s impossible, let us say that no one is asking you to make impossible sacrifices in order to get out of debt. Debt Free is all about getting relief from unsecured debt within the context of making your life work.
No, this plan will not be done at the expense of the rest of your life; in fact, it cannot be done that way. That plan would be broken in about two months, starting the debt cycle all over again. You will continue to eat, live, entertain, go to school, have lunch out, and so on. You will simply be adding one more category to your expenses — debt repayment. Your payments may not be that much at the beginning; whatever you can afford is what you should pay. This is going to be a plan that works, one you can live with.
Debt Free can help you create this sort of debt reduction/repayment plan to reduce credit card debt.
Steven D. Strauss is one of the world’s leading experts on entrepreneurship. A lawyer, author, and public speaker, his latest book is The Big Idea: How Business Innovators Get Great Ideas to Market. Steve’s columns regularly appear on usatoday.com, workz.com, bizland.com, and staples.com, among others. You can sign up today for his free newsletter, Small Business Success Secrets!, at his business Web site — www.mrallbiz.com.
The Complete Idiot’s Guide to Beating Debt By Steven D. Strauss and Azriela L. Jaffe
Here’s a friendly book that gives you hints, tips, ideas, and various options for getting out of debt, without radically changing your lifestyle or preaching to you about restrictive budgets.
The authors give you ideas regarding how to make more money, how to cut back spending, how to get rid of ALL credit card debt, how the rich think about money, and how you can follow their example.
Soft cover, $16.95