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How To Slay Credit Card Debt For Good
The numbers tell the story, and the story is that most Americans are carrying some kind of balances on their credit cards, meaning that they do not pay the balance in full every month.
The amount of debt varies, but as of a few years ago (2002) the average debt for an American family with at least one credit card was almost $9,000.00, and that number seems to rise every year. The purpose of this article is to help folks to slay that beast for good.
There are some pre-requisites. Please do not skip these. The techniques that follow will not work as well or at all if a few pre-conditions are not met. Here they are:
1. All adult members of the household must be in agreement on the plan. This may require some compromise and tweaking of the plan. Do it if you need to. A tweaked unified plan will be more successful than a perfect un-unified one.
2. Immediately stop using the cards that have balances on them. You may continue to use a card if you pay off the balance on that card every month. Do not transfer what you used to spend on the other cards to the one that you pay off.
3. Most important, you must arrange your finances so that your total expenses are LESS than your income, counting all quarterly, semi annual and annual expenses into the monthly total. You simply cannot reduce debt if you are continuing to increase it! Not sure how to live on less than you earn? SIMPLIFY! You can solve this by increasing your earnings or reducing your expenses or both. Your choice.
4. Identify how much money is extra (after you have completed step three), and divide that monthly amount in half. Take the first half and arrange an automatic deposit to a high yield CD or online account, so that the money builds and grows there.
OK please do not proceed until you have completed the pre-requisites. Read ahead if you wish, but you MUST complete all four pre-requisites before you can be successful. That said, here is the plan:
1. Find a way to NOT focus on debts. If you are able to, spend as much time as possible feeling like you are completely debt free. I know it seems like a lie at first, but it is your future, and so it is not a lie. The number one step in freeing yourself from debts is seeing yourself free of debts, and experiencing it. Play a movie in your mind that stars you as the debt free person.
In connection, arrange your debt payments so that they consume as little of your time and mental energy as possible. For some this may mean to hire a third party to administer the debt payment program for you. This is really ideal, as you no longer even get the bills in the first place, making it MUCH easier to not focus on debt. One other thing if you have trouble still. Trying going mostly all cash for a couple of months. Really gives you a feel for how much you are spending, and is really good at showing you how much you have left.
It is impossible to increase your debt when you are using cash. Use debit cards for things where they make more sense, like the gas pump.
2. Now we get into the technical aspects of how this is done. If a third party is handling your debt payoff, just give them these instructions.
First thing is to list all of your debts in increasing balance order. Ignore the interest rates for now. The smallest balance debt will be listed first and the largest balance debt will be last.
3. Make exact minimum payments of all debts except the very top one. If you are doing the payments yourself, send the payment the very moment that you receive the statement. This is the best way to keep it out of your mind (because you will not see it again for a month), and it will make your creditor happy as well. You may also call all of the creditors and see if you can arrange the closing dates so that you get all of the bills within a short time frame. Just something to think about.
4. On the top debt, make the minimum payment plus the other half of the extra money from that month (you put the first half into a high yield account). This will accelerate the payment on that top one, and depending on the size of that balance, hopefully that one can be completely paid off in just a few months.
5. Once that top balance is paid in full, take yourself out to dinner to celebrate. Pay cash for the dinner! It feels really good to do so.
6. Apply the extra half, plus the former amount of the first payment, plus the minimum second payment to the second debt. The second debt will pay much faster now because of this, and yet there is no additional money coming out of your pocket.
7. The program continues in order. As one debt is paid, you simply pay all of the money that was going to it to the current top one, plus the minimum payment.
8. As you get closer to the bottom you find these debts reducing more and more rapidly.
9. The program ends when all the credit cards are paid off. If you have enjoyed this experience, then continue the program by adding any other debt payments, car payments, and finally your house payment(s) to the acceleration. Picture being entirely debt free! This program can do that for you.
10. Good Luck! Get started ASAP!
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