Get Out of Debt

Get out of debt, the four dreaded words for credit card companies. They survive on your back, it’s true, and they count on you paying just the minimum payment for at least 30 years, maybe longer. It is a vicious cycle and makes loan sharks look like puppies in a shop window. Am I sounding a little harsh? Am I suggesting you go to a loan shark? How about a strong NO to each question, I am just trying to get your attention to help you get out of debt and stay there. By following these simple steps you will be a lot happier and financially secure and the credit card companies will have one less avenue of revenue.

Listing your debt: This is easy. Open your wallet and take out all of your credit cards (even the one you hid from view). On a piece of paper make a list of all the cards, start with the ones you have had the longest. Then gather all statements (current ones only) that show exactly what you owe, fill in the amounts and put the interest next to each amount.

Review: Circle all the ones that have a low balance that can be paid off now or in the next few months and move these to a new list, title this list; The First Cut List. These are usually ones that also have the highest interest rate. The best methods here are pay more than the minimum payment, much more and pay it off quickly. Sometimes you can do more than one at a time, but, be careful, don’t let other obligations suffer. Now, get out a scissors and cut up those cards. You will never use them again and when you send in your last payment, request a letter stating the account is closed, this is very important! Come on, go get the scissors, now, I’ll wait……..okay, start cutting. 

Transfer Time: Look at the cards left on the original list. Compare balances and interest. Look at the ones that have the lowest interest rate. Now write in credit limits on those cards. Are there any that can absorb the balance of a card with a higher rate? If so, contact the credit card company and transfer the balance(s) to that card. Now get out the scissors and start cutting, you don’ t want to use a card that will soon have a zero balance and go further into debt, that would be silly. Oh, and cut up the one you just transferred the balance(s) to. Why add more debt to that card?

Payments and Budgets: Okay, here we are. How to make the most impact for getting out of debt, and this is serious consideration time, so pay attention. Make a list of all your cash accounts; savings, 401K (some companies have a loan program attached to 401k’s-check with your HR department), life insurance policy with a ACV (accumulated cash value) only. Compare your debt to these amounts either individually or collectively. Consider this: realize that the interest on your savings account is small compared to the interest on your credit cards. If you use your savings to pay off credit card debt, you will have more funds available to build a savings account up again.

Bottom Line: It only took a short time to get into debt, but it will take more time, hard work and commitment to get out. If you can’t do it by yourself contact a credit counseling company or debt management service. You can get out of debt and live debt free. But, you still have to cut up your credit cards, oh, and your wallet will have space for pictures now.

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