Paul Hermann is an avid deal hunter who enjoys writing and sharing his best frugal shopping tips online.
The average American household is currently carrying over $15,000 of credit card debt. Factor that with an average APR of nearly 15%, and the result is a lot of money going from consumer wallets straight to the big credit card companies. Unfortunately, too many folks choose not to acknowledge the high cost of carrying a balance, and far fewer resist the urge to buy that shiny new TV or go on that much-needed vacation. The truth is, however, sometimes you have to make sacrifices in your own financial interest. Long ago, I was mired in over $30,000 of debt. The battle to get out from under it was long and hard, but I was able to beat my debt and turn my life around. If you're embarking on your own journey to get out of debt and avoid unnecessary interest payments, read on.
1. Calculate Your Debts
It's never a pleasant job, but your first step has to be to calculate your overall level of debt. This gives you a tangible goal, helps you figure out how aggressive you need to be, and how long it's going to take. After you've arrived at a number, create an additional list that includes your student loans and any other personal debts you may have. Your current mission is to eliminate credit card debt , but the overarching goal is to be entirely debt-free.
2. Get on a Personal Budget
Creating a personal budget gives you a better idea of where your money goes on a monthly basis, and can help you easily identify ways to save. Include all your fixed monthly expenses, estimate your discretionary spending, and prorate any annual fees like auto insurance so you can view their monthly impact on your checking account. Use an online service such as Yodlee which can help you create a budget and track it online.
3. Cut Monthly Bills
Once you've got a solid understanding of your monthly bills, attack them aggressively. Research the competition for services like Internet, smartphone, and cable TV, and don't hesitate to switch providers if there's a better deal out there. Bundling options, which allow you to pay a single provider for a package of all three services, can be very cost-effective, as well. Save money on groceries by clipping coupons and shopping at farmers markets, and request an energy audit from your provider to discover ways to reduce utility expenses.
4. Slash Personal Expenses
Cutting monthly bills is great, but if you have significant credit card debt, it's probably because you have difficulty controlling your personal spending. Here's a quick and easy way to reverse that trend: When faced with a potential purchase, ask yourself if you can afford to pay it off in full by the end of the month. If the answer is no, then you simply can't afford it.
5. Generate Extra Income
Cut back on TV and Facebook, and instead use that time to generate some cash. Smartphone apps such as Locket offer creative ways to make money, as do paid online surveys. If you have some free time throughout the day, consider exploring the website Delve to participate in paid market research groups. Compensation can be as high as $150 for just a few hours of your time.
Along with creating a budget, another important tool in your mission to get out of debt is establishing goals for yourself. Start with a long-term goal for when you hope to be debt-free, but then create short-term milestone goals, as well. Decide how much you want to pay off at the 90-day mark, then do the same for 180 and 360 days. Keep track of your progress, and if you reach a goal, celebrate it - in moderation. If you fall behind, don't panic. Remember, the most important thing is that you're trying, so if it takes you an extra month or two, it's no big deal. Simply readjust your goals, stay on track, and before you know it your debts are going to be gone for good.
What are you doing to pay down your credit card debts?
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How to Reduce Credit Card Debt and Avoid Unnecessary Interest Payments
06-25-2014, 11:36 AM