Credit Card Debt – Derby Advisors, How To Get Rid Of It!

How Credit Card Debt Happens – Derby Advisors

Getting into debt is so easy.  We don’t really plan to do it, it just happens.  Perhaps the kids need new shoes, then clothes, then braces, and you know the house is gonna need a new furnace.  There is always something that requires money – and never enough money to make it all happen.

Ideally we would all be able to put away enough money for all the rainy day events that occur.  However, everything these days is so incredibly expensive.  It doesn’t take much to make the debt get out of control.  I am no more immune to it than anyone else – life happens and so does debt.  If your debt has gotten too much out of control and you are late on payments or have charge-offs, you could seek help to repair your credit.

Credit cards are helpful when you need money fast.  The concept is simple – borrow the money on a credit card and pay it back in some sort of installment payback plan plus an associated interest rate.  They definitely can be helpful and get us through some difficult times.  Unfortunately though using them too much can lead to struggles to repay and then the problem can easily spiral and become worse and worse.

It is pretty easy to get into debt with credit cards very quickly.  But it takes a significant amount of time to actually get out of debt and STAY out of debt.

Strategies To Get Out Of Debt – Derby Advisors

Start with getting a copy of your credit score as well as everything that makes it what it is.  Take the time to go through each and every item on the list.  Almost every time I get a copy of my credit report, there are things to fix, accounts to close an other things to verify.  It is very helpful to see your credit report and score prior to beginning your credit card debt resolution plan – then you can see your progress as time goes by.

Determine the depth of the problem

Is your credit card debt a long term problem?  How did it happen?  Let’s say you are able to get out of debt – have you learned enough to stay out of debt?

Document and document more.  How much do you owe?  What is the interest rate on each?  Minimum payment?  It is critical that you can document and see the progress as you start making payments.  This is necessary no matter how you go about paying off the credit cards.  Not to mention you will feel great seeing it in writing when you pay off each.

Develop a repayment plan and stick to it

  • Debt Snowball plan – this is my favorite plan and whenever I find myself in a situation where I have debt to repay, I use this plan.  If you have five credit cards with balances – identify the card with the lowest balance.  Pay for example an extra $50 per month to it’s $100 minimum payment per month.  Now you are paying $150 per month to repay that debt.  Once it is paid off you will put that full $150 towards the next card.  When that one is paid off you snowball all of that onto the next one – and so forth.
  • Debt Avalanche plan – Another variation of the snowball plan is to pay off the card with the highest interest rate first. The satisfaction of paying off a card is not as immediate but it is highly impactful and in the long run will save you far more.  I prefer the smallest balance cards first regardless of the interest rate.  It is kind of like having a “to do” list and crossing things off.  There could be two giant tasks on the list and ten smaller tasks.  Completing the smaller tasks is more quick and gives you such a feeling of accomplishment.  But the reality is the bigger tasks make far more of an impact.

Budget properly to pay off credit card debt – Derby Advisors

Build and document a budget and stick to it.  There are many ways to do this – excel spreadsheets, notepads, software etc… The method just needs to be something that will work for you; you will understand it; and you can keep up with it.  A very helpful free budgeting app is EveryDollar.com.  There are some others too but this is one that I have found to meet my needs quite well.

Developing a budget and sticking to it helps you to find available dollars to put towards your debt and make a difference.  If you simply make the minimum payment amount on all your debt you will be paying huge amounts for that debt over time and will most assuredly never be out of debt.

Use cash

I have found this to be very helpful.  It is so easy to just not think about it, and slide that card – over and over again as “needed”.  Once you start living off cash and carry that in your pocket, you will find it much more difficult and stressful to part with the cash.  With a credit card it’s no big deal to just stop and pick something up quickly; and again; and again.  It just never seems to add up – until you get the bills.  But carry $100 in your pocket and it will last and last and last…

Spend less

Be open minded.  Years ago I never could have imagined not having a home phone or not having cable.  Now – those things are so unnecessary and best decisions we ever made getting rid of them.

Some ideas:

  • Ditch the cable
  • Get rid of the landline
  • Reduce the heat/shut off the air
  • Laundry in cold water
  • Purchase other items online with rebates or discount apps when needed such as Ebates (Rakuten)
  • Shop at discount grocery stores; coupons; savings apps – any way you can to save on groceries
  • Cook at home; bring your own lunches to school and work
  • Buy cheaper gas by downloading apps to help you find the least expensive gas on any given day
  • And more ways to save

Make more money

There are plenty of ways to make money besides a 9 to 5 job.  Some of the ways I make extra money are selling items on Facebook Marketplace; personal shopping for Instacart; blogging; freelance writing; photography; graphic design and more.  There are endless work from home possibilities – determine what you are interested in and resolve to make it happen!  When I work for Instacart, I put every dime I make towards credit card debt.  Sometimes it is just $25 extra a week while other times it may be $200 extra.

Saving when you think you have no money to save

Save with apps like Digit, Acorns, Stash Invest and Dobot – have the money swept automatically out of your accounts without even noticing it.  For example I have these setup to put money away for annual taxes, a loan repayment etc…

 

 

 

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