The average American has almost $8,500 in credit-card debt, so you're not alone if you struggle with debt. But with a little planning and a lot of commitment you can become debt free.
To start running circles around your debt, take these five steps:
Jump the first hurdle:
The first and most important move toward getting debt under control is to stop charging immediately. Put your credit cards in a shoe box on a high shelf or shred them - whatever it takes to create distance between you and the cards.
Make strides with lower rates:
Call your credit card company and request a lower interest rate and consider consolidating your debt onto one card. Be sure to read the fine print for details on how long a low-interest rate will last and if there are transfer fees.
Pace yourself with a budget:
Learn where your money is going. Create a spending record by writing down how much money you earn and spend each month - include impulse purchases, such as a new DVD or pair of shoes. After a few weeks, review the list to see what items you can cut out. You?ll be surprised to see where your money is going. Next, develop a budget by listing items that absolutely have to be paid, such as the mortgage, utility bills, insurance, and groceries. Then, be sure to redirect some funds toward paying off your debt.
Build speed with bigger payments:
Try to pay more than the minimum amount due, so you can reduce your balance faster. Pay your bill on time to avoid late fees and damage to your credit score. Set up online bill payments to make sure your bills are paid on time.
Being deployed may not seem like a potential boon to your financial situation, but smart money management can help you pay down your debt. Having the discipline to pay off debt with the hardship pay could give you an extra push toward a zero balance. Take advantage of the Servicemembers Civil Relief Act, which gives active-duty military members exclusive benefits, such as reduced interest rates on credit cards, mortgages, and auto loans.
Stay on track with one card:
To reduce the temptation to go back to spending, trim your credit-card usage to one card that you use for emergencies. If you use a credit card once your debt is paid off, be sure to pay it off in full each month. This will strengthen your credit rating and help keep you on the right path.
Now that you have a five-step plan to help you stay on track to get rid of credit-card debt, you can take bigger strides toward financial security. For more information, visit usaa.com.
June Walbert is a CERTIFIED FINANCIAL PLANNERTM practitioner with USAA Financial Planning Services, one of the USAA family of companies. Walbert is a Lieutenant Colonel in the U.S. Army Reserve.
