It happens to the best of us. We make multiple 'minor' financial goofs and before we know it, what started as a small manageable problem, snow balls into a catastrophe- the little drop of credit become an overwhelming flood of revolving balances. You're saddled with credit card debt!
Credit cards are so pervasive in our society. According to Experian, consumers have an average of 5.4 cards and a Federal Reserve bulletin issued in 2006 states that 74.9% of US families surveyed in 2004 had credit cards and 58% of those families carried a balance. Credit cards can be a great financial tool if used properly, unfortunately, credit card [issuers] having been getting a lot of bad press lately- some blame justifiably should be placed on the banks that issue these cards but the reality is that most people lack the discipline needed to use credit wisely and as a result end up battling significant debt.
There are a few steps to follow to ensure you get out of debt, unfortunately, none of them is a 'get out of jail' card but if applied will take you closer to reliving the ever elusive debt free lifestyle.
The first step towards getting out of debt is mental. A professional boxer friend of mine once told me that the fights he wins are those he has mentally won even before getting into the ring. If his mind is not well conditioned even after weeks of physical training and he can not visualize success, rarely does he end up winning. You've got to develop the self discipline to do all within your power to dig yourself out of the hole you're in. You can have all the gimmicks in the world, get advice from the top financial advisers but if you lack the self discipline and motivation, your victory over debt, if you're able to achieve it, will only be short lived before you find yourself in trouble again. So cut up your old plastics, put yourself in the Do-Not-Mail/Call lists so you don't get anymore solicitations, tell someone that can (and will) hold you accountable that you've decided to stop living off your credit cards as this will help curb the urge on days you feel like going on a spending binge-do whatever it takes to get your mind conditioned for the battle that lays ahead.
Next, stop making purchases on your credit card. Decide that you will only spend cash (or use your Debit/ATM card) for all purchases going forward. I know that some of you will complain that you hardly have enough money to pay your bills and that using a credit card is the only way you can make ends meet. This is not entirely true for most people. A lot of us have fallen under the illusion that we do not have enough money to get by because we are unable to separate our wants from our needs. For instance, why do we really need a car? The answer is that it is a mode of transportation to get us from point A to point B. That said, the train, public bus, a Jaguar XK, all would get us from point A to point B. The need is a mode of transportation that will get you to your point of destination, the want is a luxury and convenient mode of transportation that will make you the envy of your peers and make you "feel" important. Do not confuse the two. Pursuit of wants are mostly what make us strive to live like the Joneses and it leads to being broke.
Learn to live within your means. One of the major reasons people get trapped under the burden of debt is the failure to live within one's means. It's often said that there are 3 ways to increase means: 1) Increase your inflow (income) while holding your outflow (expenses) constant 2) Decrease your outflow while holding your inflow constant or 3) Do both, increase your inflow and decrease your outflow.
Inflow can be increased by improving your skills and job performance in order to increase your value (and commensurate salary) in the job market, having a small business that generates additional income and selling items you no longer need or use. You can reduce your expenses by paying close attention to all the items you spend your money on. Ask yourself, "Is this purchase necessary? Do I need this item or do I want it? Is there a cheaper alternative that will accomplish the same goal that this item will?"
Other ways to reduce your expenses are to avoid behaviors that will negatively affect your health (health care costs are one of the leading causes of personal bankruptcy), shop for store brands while grocery shopping. Not only do they cost less than the premium brands but they are also as good. Another exercise is to write down every expense you make in a week. At the end of the week, go through your list and you'll be very surprised at some of the purchases made out of habit without thinking- you'll probably find out that you're paying for services you really do not use, for instance paying for premium cable channels when most of the channels you watch are also packaged in basic cable.
Lastly, try to get as much information on personal finance as you can. Read blogs (like this one) and books on creating and adhering to a budget, savings, investing and the like. Knowledge is power.
