One of the biggest challenges posed to every Americans in the year 2010 is when they decide to build wealth in order to tackle their rising mountain of credit card debt. As the credit card balances have raised to $10,000 or $30,000 most Americans are seen paying an average amount of $500 towards only interest payments. Despite contributing this amount of money, they are not being able to make their credit card balances decrease. People are even falling into the cycle of negative amortization when they have to pay interest on the already accumulated interest rate and this increases the total payment. Increased credit card debt can also hit your credit score and make you appear unworthy of further lines of credit. Therefore, you need to treat your debts with utmost care and consideration. Check out the steps that you can take yourself in order to eliminate your credit card debt burden.
There are many consumers who continue blaming the poor economic and the political system for their huge amount of credit card debt. But is it a justified excuse to blame the policies of a nation for the rising credit card debt you are in? Do not forget each time you swiped your credit cards for a purchase, how willingly you bought something that you could have done without. All such careless financial behavior has led you to debt. Accept the truth and start making a repayment plan instead of involving in the blame game.
2.Start categorizing your income mentally
If you’re keen on eliminating your debts on your own, you require making a list of what you make each month and where the money is spent. Several people do not keep track of their income and spend recklessly. These are the ones who suddenly find themselves drowned in the ocean of debt. It is very necessary for you to make a list of your income where you also include those income sources from investments in stocks and mutual funds. This will help you determine your net monthly worth and thereby devise a solid plan through which you can accelerate your debt payment procedure.
As you’re going through the debt elimination procedure, you need to boost your income and savings. This can only be done through effective budgeting. The rise in the US national credit card debt level is due to the increase in the number of people who have not followed a budget. If you do not want to add to this amount of financially ignorant people, start making a frugal budget where you will allow yourself to only buy the things that you need. Cut off the unnecessary expenses as much as possible.
4.Boost your income by investing in a savings account
Investing money can be a good source of income but since you’ve already racked up financial obligations, its better not to try your luck in the risky investment market. Rather open a savings account with a reputable bank and make sure you save a part of your income in that account so that this can serve as an emergency fund. If you tend to forget to place enough money in the savings account, you can also relate it with your paycheck account so that the day you receive your salary, a part of it gets deducted straightaway.
If you want to get rid of your debts, you first need to cut short the usage of your credit cards so that you stop incurring further debts. If you’re a shopping freak, change this habit or go to shop with cash and lock your credit cards in your cupboard. Stop shopping as soon as you exhaust money and keep a single card only for emergency purpose.
6.Start triggering your debts with the smallest amount first
As you start getting positive results by your budgeting, saving and investment efforts, start triggering your debts by paying off the smallest debt. This is known as the debt snowball method. Concentrate on making the minimum monthly payments of all your debt accounts and pay off the total amount on the smallest debt account. As you pay off the debt, use that amount in paying off the next smallest account.
In the world of personal finance management, you must always avoid the red button that is bankruptcy. Follow the steps mentioned above to seek credit card debt relief on your own and protect your credit sore from being hurt. Repay your creditors to secure your future financial life and also boost the US economy.