Early this month, CNBC highlighted the story of Kristy Epperson, a 23-year nurse who cleared her student loan and car loan both worth $20,000 in just a year. What’s more is that she was able to buy a home with only 5% down. How did she manage this- ditching credit cards and only using cold hard cash.
The Business Insider also had another story of a person who got his first credit card in the freshman year in 2003. Since then, he raked up to $23,000 in debt from ten cards. But, since he made just a small change in his lifestyle, and paid off approximately $8,200 in just a few months. How? By making just a little bit more than the minimum required.
When we read such stories on the news, we’re inspired. But at the same time, we’re ashamed that we’re also struggling to pay off our credit cards with little success. The stories sometimes give us renewed energy to go back to the drawing board with a can-do attitude. But, deep down, we’re also feeling a little bit guilty that we’ve done this before with little success.
Well, it’s time to do it again. However, this time round start from a different perspective.
Step 1: Introspection
You’ve done this before, right? You’ve resolved to clear your debt, made a plan, stuck with it for a few weeks but never saw it to the conclusive end.
Today, don’t start with making a repayment plan. Start with taking some time and reflecting on why previous attempts have been futile. A few questions you can ask yourself:
What do you think has gotten you to this point?
What is your attitude towards money?
Are you obsessed over creating an impression that you’re living a particular lifestyle at the expense of your financial security?
This first step will help you unearth your money mindset and habits that you should start working on before working on repaying your credit card debts.
2. Make a repayment plan
Which card do you pay off first?
It’s advisable to pay one card at a time. However, as you do this, also pay the minimum requirements for the other cards to avoid penalties.
The critical question to ask is: do you pay off the card with the lowest balance, or do you go with the one with the highest interest?
It depends on your priority: if you’d want to clear one of the cards as fast as possible, then go with the one with the lowest balance. However, if you want to avoid the accumulation of debt, go with the one with the highest interest.
All in all, note it’s financially smart to go with paying off the card with the highest interest first as opposed to the one with the lowest balance.
3. Consolidate your debt
Paying off many credit cards and loans can be exhausting not only financially but also mentally as you try to keep up with the progress on each card. Debt consolidation is an excellent option since you’ll be dealing with one lender who is charging you a constant interest.
To consolidate your credit cards, you can either open a balance transfer card or take out a personal loan. Transfer cards usually have a promotional period whereby the interest is 0%. If you can clear the debt within this period, you can save a whooping lot of cash.
4. Credit Counseling
It’s essential to ensure that you make a repayment plan and stick to it. However, sometimes, it’s hard to ditch our self-sabotaging money habits. It’s therefore recommended that you seek out a professional who can help you with credit counseling.
Note, there are lots of scammers in the credit counseling industry; therefore, only go individuals and companies you’ve been referred to.
5. Get an accountability partner
Alternatively, get a peer who is also working towards repaying their debt and become accountability partners. When someone else is holding you accountable for your actions, it’s easier to be consistent with your habits.
You owe it to yourself, your future, and your dependents to live a financially-free life. To do that, you need to cultivate habits that will help you repay your credit cards and build a financially-secure future. The key to doing this is adopting certain habits and reminding yourself every day of the bigger goal. Therefore, make the big goal as attractive as possible. Pin on the bedroom wall, on the fridge door and make it your screen saver. Then start working on habits that will see you get out of debt. Start today.