Your Way Out Of Debt

Credit cards are the primary source of personal debt in the United States, with the average household having an outstanding balance of nearly $9,700. If you’re in a situation where you owe thousands of dollars on your credit cards, a debt management plan is one way to experience debt relief.

Below are five tried and true tactics to help you eliminate your credit card debt. Simply take one step at a time, and you’ll stop adding to your balance and become debt free faster.

Debt Management Step #1: Pay off your smallest debts first. Begin by targeting one balance you view as an achievable goal. Then, once it’s paid off, reward yourself and enjoy the boost in self-confidence. Once you pay off one small debt, you can take the monthly payment you were making and apply it toward another debt. This is a quick way to save a lot of money in interest charges.

Debt Management Step #2: Stop borrowing money. Yes, borrowing money even includes using your credit cards. The interest added to credit card charges is outrageous, especially when you have a history of late payments. The same goes for loans on large purchases. Why not pay cash for similar items that cost less?

Debt Management Step #3: Gradually increase your debt payments. This step might seem impossible right now, but that’s only because you’re likely visualizing larger payments than are necessary. Start small – even just a few dollars – and slowly build up your payments. Every dollar paid toward your debt puts you one step closer to being financially free.

Debt Management Step #4: Start paying with cash. When you get in the habit of using cash for purchases, you pay closer attention to your spending habits. With credit cards, it’s too easy to spend now and worry about the costs later. Buy with cash, and you’re forced to only spend the money you have. Remember, no one has ever charged their way out of debt.

Debt Management Step #5: Avoid home equity loans to pay off your debt. If you take out a home equity loan, invest it in something that will make you more money. Using funds from a home equity loan to pay off debt on a consumer loan – credit cards, cars, boats, etc. – will negatively affect you from a principal perspective. Whereas most of your monthly payment on a consumer loan is applied toward the principal, interest will consume most of your payment at the beginning of a home equity loan.

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