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3 Tips for Eliminating Credit Card Debt

3 Tips for Eliminating Credit Card Debt

Healthy financial habits will have you sleeping like a baby

If you’ve ever woken up in the middle of the night panic-stricken about the amount of debt you have racked up, you’re not alone. Credit card debt is the second-most-common type of debt after mortgage debt (and I’m going to assume we all know that your house is not an asset and therefore your mortgage is not considered good debt, right?). In fact, the average American family owes $8,377 in credit card debt, according to personal finance site WalletHub, which analyzed credit card debt trends in 2016. That’s certainly enough to keep someone up at night.

As a reminder, there is good debt and bad debt. Good debt is debt you use to acquire assets. Bad debt keeps you trapped, pulling you back instead of moving you ahead. In most cases, credit card debt is bad debt. And that’s why you must get rid of it, because it’s serving no positive purpose in your life. Here are some suggestions for obliterating your credit card debt once and for all:

1. Pay off new credit card charges every month

Credit cards have their advantages so don’t cut them into pieces or put them in the freezer. Instead, use them as a convenience, as a record-keeping tool, and as a way to verify to other creditors your ability to be financially responsible.

From this day forward, if you so agree, do not accumulate additional credit card debt. If you charge an item to your credit card, then pay that amount off when the statement arrives. If you have credit card debt that is more than 30 days old, then pay off all newly acquired debt and put a plan in place to pay off the old credit card debt. Why?

Credit card interest is always compounding, and over time it quickly adds up. Let’s say you have $100 in debt and it accrues 20% interest every month. In your first month, you will be charged $20, which gets added to your original debt. The next month, you are again charged 20%, which now comes out to $24. So after only two months your debt has gone from $100 to $144. Yikes. That’s literally throwing money away and nobody can afford to do that.

2. Don’t charge the small stuff

It’s astounding how quickly all of our minor daily purchases add up—from your daily coffee fix to a magazine at a convenience store. And it’s becomes very easy to justify all those small purchase at the moment. Only $3 for a lip balm because I accidentally left mine at home? No problem! But at the end of the month, those purchases really do add up.

Using physical paper money creates tangible awareness of how much you’re dolling out each day. It might even cause you to reconsider some of those small purchases when you find yourself running out of cash too quickly. Starting today, try using cash for any purchases under $20 and see how your spending habits adapt.

3. Pay off existing credit card debt

Robert and I were in a great amount of bad debt years ago—around $400,000. It was incredibly stressful. Talk about sleepless nights! But we paid off all of our debt in less than 10 years, including credit cards, car loans and home mortgages.

For our credit cards, we came up with an extra $100 in income per month. How? By getting creative. We then applied that additional $100 to our monthly payment on only one of the credit cards and paid the minimum payment plus the extra money on that one credit card. While we were focused on that, we paid only the minimum amount due on all other credit cards.

Once the first card was paid off, we applied the total amount we were paying each month on that card to our next credit card. This mean we were paying the minimum amount due on the second card plus the total monthly payment we were paying on our first credit card.

Continue this process with all your credit cards—with each debt you pay off, apply the full amount you were paying on that debt to the minimum payment of your next debt. As you pay off each debt, the monthly amount you are paying on the next debt will escalate.

It is possibly to become debt-free—often within five-to- seven years—but you must make the decision to do so and start today.

Source:http://www.richdad.com/Resources/Rich-Dad-Financial-Education-Blog/April-2018/3-Tips-for-Eliminating-Credit-Card-Debt.aspx 

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Ideas That Could Help You Reduce Life’s Expenses

Ideas That Could Help You Reduce Life’s Expenses

Life can be expensive at times. Whether you’re a frugal person or not, you most likely spend a lot of money every year on rent (or mortgage payments), utilities, food, gas, clothes, taxes, insurance, and a wide range of other essentials that are either necessary for your wellbeing or imposed by the government. These are necessary costs, but you can reduce the amount you spend on many of those necessities. The answer isn’t to simply stop treating yourself to luxury things; you can save money in that regard too. You just need to organise your finances. Here are some ideas that could help you to reduce the many expenses that life hurls at you.

Spend less on necessities.

One of the best ways to save money in life is to take a look at the necessities in your life and see where you can alter your budget. You obviously need to set aside enough money for the weekly food shop, but you might not need to spend as much as you currently do. You could search online for deals and discount codes that can be used at certain supermarkets. As for your energy bill, you could reduce that by unplugging any electronic device that’s not being used and even getting thicker glazing for your windows. You don’t have to sacrifice some necessities in order to save money; you just need to think of smarter ways to get the things you need.

Do some research before you make those big purchases.

Of course, everybody faces big costs in life. A new house, a new car, a college education, and other costly things are all essential aspects of life in the modern world. These are unavoidable things for the majority of people. Whatever your lifestyle, you’ll probably be faced with at least one such “big purchase” at some point in your life. It’s important that you, at the very least, do your research so as to save as much money as possible on those massive costs.

For example, you should always haggle when you’re house-hunting; never accept the asking price because most sellers will gladly accept something lower. The initial price is just a starting point. As for buying a new car, you should do some research on used car finance to see if you could get cashback or other deals on your purchase. Referring back to the first point, you can save money on necessities. A car might be essential for your travel, but there are cost-effective ways to go about buying one.

Put your money out of reach to cut back on non-essential expenses.

One of the best ways to reduce your expenses is to resist temptation. And if you put some of your money out of your reach then you’ll have less disposable cash to spend on things. You’ll still be able to treat yourself to meals out or nice clothes, but you won’t be able to splurge as excessively as you could if you kept all your money in your main account. That’s why you should regularly transfer money to another account. If you set up an automatic standing order that sends a portion of your income to your savings account every payday then you won’t have to worry about accidentally dipping into your excess cash. It’ll be out of reach. It’s a good way to teach yourself to be more fiscally responsible and reduce your luxury expenses.

Source: https://blog.themoneyshed.co.uk/ideas-that-could-help-you-reduce-lifes-expenses/