The problem with credit card debt is that it sneaks up on you. Often, you only realize you’re in trouble when creditors are hot on your heels to call in their loans. As we all know, it is easy to get into debt, but it is not so easy to get out of it.
In the UK it’s not uncommon for people to carry up to £26,000 in credit card debt, according to the founder of the website DebtWizard.com. The average debt in the UK is £3,200, which is for consumer loans such as car loans and credit cards.
It is possible to fight your way out of debt, but what steps should you take?
- Do a self-assessment to establish exactly how much you owe
- Be sure to be honest with yourself – many people don’t know exactly how much they owe
- When you know exactly how much you owe, do the math to see how much you can pay each creditor each month.
- Know your monthly cash flow; how much comes in each month and how much goes out
- Make sure you are hard on yourself; track every penny for at least 2 months
- Save all your receipts
- When you buy cash take note of it
After two months, you should have a good idea of how much money is coming in and how much money is going out. You will also have a picture of what expenses are necessary and what are not necessary.
Now trim!
Just do it. Remember that every little savings will add up and help you get out of debt. You don’t have to be hard on yourself forever, it will be better once you are debt free. If you go out to dinner once a week, it doesn’t sound like an extravagance, but keep in mind how much it adds up over the year. Go out to dinner once a month instead of every week. Bring lunch to work instead of buying lunch. These are just two simple things to reduce. You will find other areas where you can cut costs.
Get rid of small debts as soon as possible. This will solidify things and help you feel like you’re accomplishing something. Remember that the more debt you pay off, the less interest you will pay in the end.
If you have enough equity in your home loan, you might consider borrowing it to pay off your high-interest credit card. Once again, do your homework to see if it’s a good idea to juggle like this. Keep in mind that if you have a lot of credit card debt because of bad money habits, it may not be a good idea to borrow on your home. The last thing anyone wants is to put their home in jeopardy. If you have bad money habits, you need to pay off expensive credit cards first, and then move on to the next high-interest debt and get rid of it.
If your debt is really high, and you realize that even with the reduction, you’ll still be in debt in the long run, you should consider taking a side job. You won’t have to work the side job forever, just until you’re debt free. Imagine how liberating that will be!
the extra work
One incentive to get an extra job is that once you’re out of debt you could stick with the second job for a bit longer and then treat yourself to an exotic vacation paid for in cash… or some other luxury that would give you incentive. to get out of debt.
