Credit Card Debt Management

Credit card debt management is all about having a plan for your money. Credit cards can be what gets you in trouble or can help you get the things you want out of life. You almost have to have a credit card to do certain things, but they can be a double edged sword. We all tell ourselves that we will pay our accounts off in full, but do we. Some of us do and some of us don’t. I have seen people that have filed bankruptcy more than once and I have seen people that have been in credit counseling more than once.

Why would you want to put yourself through that more than once? It is easy to understand how someone can end up in debt. As recently as five years ago, lenders gave credit cards to almost anyone. With all the marketing for no money down and 0% teaser rates, it is no wonder individuals have credit card debt. Another problem is we don’t go out of our way to educate our children on how credit and debt works. The best thing you can do is have a plan for yourself, whether you have debt or not.

If you have debt, that should be your first priority. The best thing you can do is make minimum payments while saving a $1,000 emergency fund. This small fund should take care of most small unexpected expenses. This will keep from adding to your credit card debt while you are paying off your credit card debt. The best way to pay it off is to snowball your payments. It works by making minimum payments on all accounts but one. That one account will be your target account and you will pay as much as you can on that account.

You will follow this plan until you have paid off all your consumer accounts. If possible, you should pay off your debt in 3 years or less. I like the plan that Gail Vaz-Oxlade lays out for clients. They have 3 years to be out of debt and if that takes increasing your income, so be it. Many of these people are debt free in less time than that. During the time they are repaying their debt, they usually have to put a small amount each month ($200) into saving and another amount ($100) in an emergency fund.

Her plan requires you to live on cash for variable expenses. This is a great plan, but as long as you track your spending and control it, you should be fine. Many people cannot control the easy access to money that debit and credit cards allow. If this sounds like you, cash will be your best bet. You plan should have a strategy for debt repayment (if you have it), savings (emergency fund), retirement savings, fun and giving back.

Becoming financially stable is a process and it has several steps. It all begins with managing your credit cards. You will never have financial stability as long as you are carrying balances on your credit card. If you have debt, get started today working on eliminating your consumer debt.