Are you trying to get out of debt but having trouble paying down your credit card bills? If so, then there’s a good chance you are making some simple mistakes with your debt repayment strategy. Unfortunately credit cards don’t come with instructions, and barely explain how easy it is to build up a large balance. But if you go about it the right way, and you can avoid these common mistakes, then you have a real good chance of becoming debt free.
1-Don’t write down their goal
Big mistake! One of the most important things you can do when trying to reach a goal is to write it down on a piece of paper. So go grab a pen, or fire up your computer, and write down exactly it is what you want to achieve. It might sound silly – if you know your goal, why do you need to write it down? Well, writing it down makes it seem more real. Rather than just having a goal in your mind (that you can easily forget) by writing it down it takes on more meaning. Also, once it is written down you can put it in a place where you will see it often, and remind yourself that you are committed to reaching it. And while you are at it, put a deadline for reaching your goal – for example, “I will get completely out of debt by December 31 2012″. And write down the steps it will take to get there. The more specific you can be, the more likely you’ll reach your goal. Something like “I will pay off my fist credit card on July 2011, then pay off the second one by November 1 2011…” Try it. It works.
2-Don’t put away their credit cards
Shame on you if you are trying to get out of debt, and you don’t get rid of your credit cards! There’s no way you can pay off your debt if you can still buy that nice shirt or dress that’s on sale with your Visa card. You don’t have to cut them up or destroy them – simply lock them up in a safe deposit box, or put them in a sealed envelope somewhere safe – and somewhere that you won’t see them all the time. OK, you can keep one in your wallet or purse in case of emergency. But ONLY for emergencies!
3-Don’t change their spending habits
This mistake should be SO obvious that everyone should avoid making it. But it’s not. For some reason, there are people who just don’t realize that they can’t keep spending money AND get out of debt at the same time. And I’m not just talking about buying store brand bread and cereal. If your debt is out of control, then you need to make some serious changes in the way you spend money – like getting rid of cable TV for a few months (or at least getting rid of the high-priced premium channels). Or turning off your cell phones (or at least getting rid of the expensive data plans or changing to a lower priced plan). Or selling your expensive sports car or SUV and buying a low priced used car. “But I can’t live without cable TV or my cell phone, and I need that shiny new car to get to work” some people will say. Then be prepared for a long, costly battle with credit debt, my friend.
4-Don’t realize it will take time
Unless you’ve been doomed by some financial disaster, chances are it took you quite a while to get into debt. And unless you are fortunate enough to inherit a bunch of money or win the lottery, chances are it will take you quite a while to get out. I wish I could tell you there was some “secret” way to pay off your debt in just a few months. Or that there was some type of free government grant to help you get out of debt without paying it all back. But there are no secrets. And no free grants. But there are good companies that can help you lower your interest rates and your monthly payments, so more money goes towards your balance. Go find a good debt relief company and follow their plan. Before long, you’ll be on the road to being free from debt.
5-Don’t realize credit card companies won’t offer much help
In a perfect world, the credit card companies would lower our interest rates to under 10%, allow us to defer payments for as long as we want, and only allow us to charge as much as we can afford – and if you think any of this will ever happen, WAKE UP! Sure, it’s nice to dream. But that’s all it is. And all it will ever be. After all, who runs the credit cards? Banks. And why are banks in existence? To make money. So as long as people like you and I keep using credit cards, and keep making payments on large balances with high interest rates, then they’ll keep making money. So, this all leads to one simple question – why in the world would the help us when they make oodles and oodles of money from customers who can’t manage their finances? It’s in their best interest to keep us paying. Which, of course, does not make them evil in any way. But we as consumers need to understand this. And need to understand why we need to manage our debt on our own.
So there you have it. If you’re making any of these 5 mistakes, chances are good you’re having trouble paying off your credit card debts. While these lessons are sometimes hard to hear, by learning them well you’ll be that much closer to gaining control of your own finances. Go ahead and grab that piece of paper and pencil, write down your goals for getting out of debt, and get started on the road to life without debt!
Author Bio: This article was written by Kris Bickell from www.Debt-Tips.com, where you’ll find lot of helpful tips for getting out of debt and fixing your credit problems.
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Great overview of some basic principles. I especially agree with #1, not writing down your goals. I would go one step further and make sure that you read your goals first thing when you wake up and right before you go to bed. It will be a constant reminder that you need to get out of debt to improve the quality of your life. Keep up the great posts!
I agree with most of what you said, however putting away your credit card is just a temporary fix. One needs to learn how to change their use of credit cards.
I not only think that your ultimate goal is important, and must be written down, but also there should be mini goals as this is a process, and will take some time.
Even at work, goals are seldom met unless the management looks over your shoulder all the time. Individuals at home in their personal finances are way farther than setting goals let alone meeting them. Following goals can be done only for a month or two, then after that very few still keep at it. Otherwise, most folks would not have debt problem as they have now.
Americans mindset is quite different than other nations. They must change their mindset. The most important thing for anyone to follow is to spend less than they earn. That’s the only magic one has to follow.
Whether you use credit card, cash, or debit card, as long as folks have the tendency of spending more than they earn, they will have debt problem.
America is considered the richest country in the world. However, for many, it has turned out to be a third world country. There are people who live on $2 a day income in some third world countries. But they live a more satisfied life than folks in America who may make in thousands. But they still remain “poor” with lots of problems in their financial life.
Change your mindset, America!
This is a very good start. When I was in debt I picked up a part time job, prioritized, stopped eating out and did group activities with the family (fishing, going to the park, playing games at home etc). Now that I’m out of debt, I’m still doing the same things.
My wife was the biggest spender in the family. Online shopping became a very bad addiction for her. I made an agreement with my wife that if she stopped shopping online, I would buy her something special for her at the end of each month. It saved me a ton of money!
These are all great tips. I can just see my husband reading down this list going, “Doh!” (like Homer) after each one. Hehe
@ Doable: You are right on. People need to change their mindset & the spending habits in order to get out of debt.
@ Samantha & Dr Lawler: I agree, setting a goal and of forgetting about it won’t work. You need to find ways to keep the goal in front of you daily, and break it down into small steps.
Thanks for the tips, hopefully they will help me to solve problems with their loans.
This article was a good one, full of great tips, and the other commenters, just added some more. Goal setting is the key – personally, i’m a list maker and nothing give me greater satisfaction than crossing something on my list. Getting out of debt is something that will go at the top of my next one!
It’s best to consider credit cards as a form of payment that must be paid each month as apposed to a loan. Setup an auto payment (standing instruction from your bank) to pay your balance in full each month and you will not get into a pickle. If you’re in it set it up to pay each month after your salary is deposited. It’s a discipline.
Your points are very on the “money”, excuse the pun. I think the number one thing is that people not only don’t write down there goals, but they also don’t stick to them because of the amount of time it can take. Often getting out of debt can take drastic life changes and its a tough adjustment to make.
I think using credit cards could actually help in getting rid of debt. Most vendors have priced in the cost charged by credit card companies and not utilizing your credit cards just means increased profit to the vendors and you get cheated out of points that can be converted to cash in many cases. If you’re going to avoid using your credit card, then at least try to see if you might be able to get some discounts for using cash.
I’ve been working on paying off our CCs. What’s keeping me going these last few months is really studying the amount of interest I paid out last year compared to how much lower the balances are. Yikes. Now I’m throwing everything I can toward the CCs.
Most of the people decide to close their credit card accounts while they become unable to pay debts but this is the biggest mistake as it hurts the credit score a lot.
I agree with you. I personally keep a list of not only my financial goals but also, for my daily tasks. It’s easier to wake up in the morning knowing what you want to accomplish during the day. The same applies when we want to keep our finances in order. If we have credit cards debt and other debts to take care of, your advice comes pretty handy. Thanks for the tips, I’m sure many consumers will follow your advice.