Are you drowning in credit card debt? Credit cards are very tempting to use when you don’t quite have enough money to buy that new pair of shoes that you can’t live without, pay for car repairs or dr bills. As you can see, it can be very easy to rack up debt easily unless you are willing to pay off your credit card bill each month.
Many of us are guilty of using our credit cards to pay for items that we want but can’t afford to pay the bill when it comes in the mail. Instead, we pay the minimum payment and carry balances month to month. Each month that your credit card has a balance, you are also stuck paying interest on your purchase. This is where credit card companies want you to be and make constantly stay in debt.
How much debt do you think the average credit card debt that most Americans have? In 2018, the average American households have over $6800 in revolving debt, including credit cards. It is no wonder many families feel like they are drowning in credit card debt or debt in general.
Getting out of debt is possible but it is going to make sticking to a strict budget and stop using your credit card unless it is a major emergency. Let’s take a look at ways to reduce your debt so you can stop feeling like your drowning in credit card debt. You can also use these tips to reduce your overall debt too.
List All Your Bills
Gather all of your monthly bills and list them out. Don’t forget those bills that come quarterly or annually too. We also suggest factoring in an amount designated for emergency items or for those last-minute items that pop up occasionally, like oil changes, car repairs, new tires, dr copays, etc. Also, list the average amount that you usually pay on each account.
Trim Any Bills That Aren’t Necessary
As you are going through your bills and bank statements, take a hard look at everything that you are paying for each month. Is there anything that you can cut and help reduce wasteful spending? If not, we will come back to the step in a few minutes.
Set Up a Monthly Budget
Calculate your monthly take-home pay and list the essential items that you must pay for each month first. You will want to list out your mortgage/rent, electricity, gas (both for your home and cars), water/trash, insurance, car payment, daycare, food, cell phone bill, internet, monthly necessities (personal care items/household), debt payments and run a total.
Then once you have a total for essential items necessary to live each month then you can start adding a few extra items like cable, entertainment.
Once you have a running total, then it is time to go back and look at ways to trim those extra expenses that add up, even though they may seem insignificant at the time of purchase. Cross them off your list and call immediately to cancel your subscription now. This will prevent these extra expenses from coming out of your account.
Next, you will want to call your electric, cell phone provider, cable company, internet provider, get several quotes from several auto insurance companies to confirm that you are paying the lowest rate available, and renegotiate your rates. We suggest doing this on an annual basis to ensure that you aren’t overpaying for services that you need.
Taking the time to renegotiate your rates can trim off several dollars a month to several hundred depending on the rate changes. For example, our car insurance was outrageous even though I had been with the company for 10+ years, they were overcharging us by $200 a month. That is a huge difference in price and no I didn’t switch to a provider who wouldn’t be there in case of an accident.
List All of Your Credit Card Debt
On a separate sheet of paper list out all of your credit card debt, payment due, balance, and interest rate. Then list them in order from the lowest balance to the highest. Now calculate the amount of money that you saved when you called and renegotiated your rates. This money was already in your budget and so the “savings” can be used to help pay down your debt.
So the next month when those companies bill you with the new rates, take the savings and combine it with the minimum payment to your lowest credit card debt. If you are a super serious about getting rid of your credit card debt, any extra money left in your accounts can either be moved to your savings account or use the money to pay an additional payment on your lowest credit card bill.
Continue this process until the first credit card is paid off. Then take the minimum payment for the next card and add the amount that you were paying on your lowest debt. Start paying this amount and any additional payment that you can each month to pay off your second credit card debt. Keep repeating Dave Ramsey’s debt snowball method until you have paid off all of your debt. I plan on using Dave Ramsey’s debt snowball method when I purchase the home that I am currently renting so that I don’t end up paying all that interest. One way that I plan on making it work, is to use my tax refund each year and apply it to my mortgage. This will keep me from spending my refund on frivolous stuff that I don’t need and make it possible to have a nice place to live long-term since I’m disabled.
Schedule a Consult with Punch Associates if You Are Still Struggling
If you still feel like your drowning in credit card debt, you should schedule a consult with Punch Associates and meet with a financial planner. They can guide you on how to get out of debt especially if the snowball method isn’t working for you. A financial planner can take a look at additional options such as borrowing from your 401k, getting a debt consolidation loan, refinancing your home loan, or to take out a home equity loan. These options are an option if you are drowning in debt or don’t have any wiggle room in your budget.
Drowning in credit card debt can be a frightening experience especially if you don’t have the money to pay it off. But there are single parents and even those who live paycheck to paycheck to get out of debt so you can too. It will take discipline and sticking to your budget to make it happen. We promise that giving up eating out except for special occasions is worth it or giving up your morning Starbucks coffee run. All those small expenses add up and if you can save that money you can be on your way to being debt-free.
Some people cut up their credit cards or stick them in the freezer to avoid using them. However, keep in mind that it is good to have long-standing accounts left on your credit report. If you have multiple credit cards, it is possible to close several accounts without impacting your credit card score significantly.
14 thoughts on “Punch Associates: What to Do if Your Drowning in Credit Card Debt?”
Credit card debt is one of the worst you can have because the interest rates are so high. I think so many people don’t realize this and can use a financial planner.
these are def great tips to help especially if you need the extra help! i love using a financial planner to assist us!
This would be tough. I am glad we pay off our credit cards every month. I wouldn’t be able to handle being in debt.
It can feel like a never ending battle. I need to share this with my friends; some need a lot of help.
I know a few people who have had trouble with credit card debt. Thankfully, they paid it off.
Thankfully, we’ve been really good with our credit cards, as has our 20 year old daughter. My 16 year old though, I worry about her ever getting one. She just asked why she couldn’t have one now. Well, you don’t have a job to pay for the purchases! Good grief! Getting into any kind of debt is scary, but credit card debt can usually be avoided.
Great tips! Setting up a budget is a must. We do that and so far, so good. Never thought of asking a financial planner for help. I do think it’s a great idea.
This is fabulous advice for getting out from under debt. It’s so stressful to have money woes, so eliminating credit card debt can be life-changing.
We have a pretty good handle on our credit and credit cards. This is good info for kids that are of the age to apply for credit cards, and those who need help.
I love using my credit cards to earn rewards on every purchase. I always pay them off every month. I think these are great tips. I need to start budgeting so I can save more money.
I make sure to keep my expenses in check and it’s really important to watch out when using your credit card so as not to drown in debt. These are good tips for people who are having trouble with their credit card bills.
This sounds like such a great company to have on your side when you are struggling with debit – it is amazing how simple it is to spend on your credit card at times isn’t it?
We are going to be debt free, including the house, in 3 years. We are following the Dave Ramsey method, on baby step 2, but we won’t need to save for college or three months, as we have retirement in addition to our current full time jobs. It is so exciting!
I always ensure to pay my credit card bill on time. Thanks for sharing all the information.