What Mindset do you have to Get Rid of Your Credit Card Debt?
You go out to your mailbox hoping the folks have sent a surprise letter with a check in it (never happens…). What do you find instead?
PAYMENT DUE ON CREDIT CARD.
They never leave, always knocking, you’ve got to get out of this mess! You know the solution…
Order a pizza, you still got $10 left on the card before it’s maxed out, score! Extra Cheese!
Our Problem with Credit Cards
The problem with credit cards is different than we think.
Since, we don’t see the physical money leaving our account, its easy to think, I’ll pay that back later.
Why do stores offer their own credit cards? So you don’t worry about how much something costs!
You sign up to pay outlandish interest so you don’t have to worry today about price.
You end up paying WAY more as well with a credit card. Up to 100% more!
We don’t want to worry about money, so instead of losing the cash right now, we chose to lose it + interest down the line.
Then it’s justified because we think we have a plan to pay off the purchase, until we make another purchase, then another.
We say that crap more and more and we see the debt pile up…my wife and I have done it too!
We knew we had to build a plan to pay down the cards.
Relieve yourself and your family from it and start today! Debt-stress is a big boulder you carry around that rubs off on everyone.
Learning how to manage Debt is where you find Success.
Ignorance is Bliss!
My wife and I had debt across 4 cards (four!)
Where’d it all come from?
Yep, College….the ultimate money suck you will ever find… the black cave of wonders.
What’s the worse thing some people do. Remember, we don’t want to stress about money (that’s how the debt compounded in the first place,) so many ignore it.
“I’ll pay that on a rainy day.”
Don’t you dare ever ignore credit card debt!
It does not go away (unless you file for bankruptcy which is even worse).
You have to think long-term, because the more your cards get out of control, the worse your credit score will be.
A low credit score means more interest payments with you paying much more than if you would just bucking up and taking out your debt.
So take a breath and start slow.
The important step is mindset. It’s a mountain that looks to high to climb. Not true!
We are built to feel good about accomplishing what we didn’t think possible.
So you want to structure your payoff in a way that you hit every goal you can.
Build Mindset First
Think of it like in Mario-Kart (hey, we were all kids!) when you need a boost you eat or chew or smoke or whatever they do with the mushrooms and you boost your Kart.
You need those mushrooms to come in increments to stay ahead not just at 1 point in the race.
That momentum keeps you chugging forward.
It’s the same with tackling boring debt, you need those boosts in increments. If not, you burn out and get discouraged.
My wife and I just paid off one card and you actually feel the weight lifting off your shoulder.
It gets easier with time and you get excited to attack the next challenge.
Build confidence in yourself and reach each goal 1 step at a time. Paying down debt is a marathon, not a quick sprint.
You Need to Use Your Credit Card
Yes, you heard…read that correct.
How easy it is to say “just pay it down you punk”, but that doesn’t help break the habit that started the mess.
Credit cards are not bad, they are actually very useful and give back way more than a debit card, not to mention liability protection.
Those who say they are bad just don’t know how to keep it under control.
My wife and I found that out the hard way, I’m sure many others have as well!
Credit Cards are like puppies ( go with me for a second), if you train them in the beginning, the relationship blossoms.
However, if you leave them their own devices without training yourself or the pup, it becomes a stress, and you worry about taking your pup anywhere. In the same way you worry about taking your CC anywhere because it could get declined, or get you into mega-trouble.
Good analogy right, but let’s get to how to solve this problem, and build a good habit..
Snowball your Debt with Good Habits
Is it not easier to break one stick at a time rather than a whole collection.
The “Snowball Effect,” made famous by Dave Ramsey, is the best way to attack your credit card debt.
Many say “start with the one with the most interest”.
I believe that starting with the small balances first gives you better chance for success.
Remember Mario-Kart? Killing small first will lead to early victories (boosts) and thus accelerate the momentum building.
1) Organize your cards by Balance. Obviously, you need to pay a monthly balance for the others so you are going to pay the minimum on those. Figure out how much you can afford to pay towards your first card. The more you pay, the faster this process will be over.
2) Extra Money should be put towards Debt: You don’t have to put all your “surprise” money, e.g. tax return, holiday money etc. towards it, because that’s no fun, but make sure you put some of it towards your debt!
3) Sell Your Crap: Adam Baker is the MAN when it comes to this, go check out his goodies! Seriously, if you can sell junk you don’t need, think about that extra income…
4) Use your Card you’re paying down: Use it for things you normally buy, not for going crazy. The key is to use it, then pay off what you spent at the end of the month. You’re building a habit. A habit of taking care of your needs/wants safely with a card and understanding it’s power and luxury.
5) Keep your total amount spent towards Credit Cards steady: What does this mean? Well: for example, if you have 3 cards that you pay each month $50, $50, $100 respectively to each month (=$200 for math junkies), once card #3 is paid off, you still should be paying a total of $200 a month towards the remaining two cards. The beauty of the system is now you attack card #2 with $150 a month, while when you were paying off card #1, you were only paying $100 a month.
SNOWBALL MOVES FASTER!
6) If you don’t get rewards with your Cards, find a new one: After you build that successful habit from #4 and paid down your cards, if you’re not receiving rewards, talk with the credit card company to start receiving those perks. There’s too many goodies on the table. Get some!
Negotiating with a Credit Card Company can be a pain, so in the future, we will look into how to deal with these fellows!
I will write updates as my wife and I tackle our Credit Card Debt and let you know how our strategy is working!
Got a Credit Card Story to Share? Let us know in the Comments!
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