[Debt Eliminator]

How can I get out of credit card debt?

[DownUnder]

Set up a budget and pay it off. On the months you can send more than is requried it will help

[JBeaucaire]

#1) The Big Step

The first step, and hardest, is to stop using credit cards. Debit cards are sort of OK since purchases come directly out of your checking account, but when you're trying to stop "charging", you might want to stop using your debit for awhile, too.

It's hard to stop the plastic habit, especially if it's all you've ever done. But the first step is always the same. STOP using them. Period.

The cards should be removed from your wallets and destroyed. You can contact your credit card company and see if they will close your account to new purchases. Many won't until you pay it off, but it's worth asking. If the cards are destroyed you won't be charging with them, so that should at least help.

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#2) Shore Up the Home Front

Now you have to make the balance disappear.

Each month, set your budgets for necessities:
A) Rent/Utilities (Housing)
B) Food
C) Transportation
D) Clothing/Hygiene

None of those things are optional, so the funds necessary must be budgeted. #D should be as close to zero as possible, but makeup and hygiene alone will require something.

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#3) Service Existing Debts

Pay the minimum payments on all your debts.

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#4) Emergency Fund

Put some money into a cash-accessible emergency fund. 10% a month would be great to start.

Keep funding this account in this manner until you have put enough money aside to pay 4-6 months of your necessities. (See #2 above)

You have to put some money between you and the universe. One of the biggest uses of credit cards is to underwrite unexpected expenses like car repairs, tickets, family emergencies, medical co-payments, etc.

The truth is, all of these items should be accounted for in your monthly planning, but a general purpose Emergency Fund should suffice, and it makes the need for credit cards disappear completely.

Funny how cash can do that, our grandparents knew that... our parents forgot, and we were never taught it at all.

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#5) The Escape

Now that the bills are paid and the emergency fund is being funded (1-4), take the rest of the money that is available at the end of this process and put as much of it that you can (all of it! ) onto your credit card balance.

Do it. Be aggressive. Be strong. Until the balances reach zero, you will never be free. Free yourself.

People who do math will say "start with the highest interest rate debt and pay that off first."

Well, if we were good at math, we would never have gotten ourselves into credit card debt, hehe. So I have a different approach I support and it gives you a greater sense of accomplishment. This is critical to us humans who like being rewarded, we like to feel like we're getting somewhere.

So, I say start with the debt with lowest balance and put all your extra money on THAT bill. This way a debt can be made to disappear completely from your life, as fast as possible.

When the tiniest balance debt is gone, move up the list. As you do so, the amount of money you have to do this each month will actually increase.

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When my wife and I did this 8 years ago, we had 9 debts totalling $45k including two car payments. We made the first debt disappear in only two months, the next was gone 3 months later. In the end, we were making HUGE payments on the cars since they were the only things left and we were completely done in 3 yrs.

Debt free.

We haven't had nor used a credit card since and we don't miss it. It's amazing what you can do when you have access to your own paycheck.


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Now go for it!