Being a part of an economy where consumerism has taken over the ideology of savings, I would love to spend money to satisfy my necessary and unnecessary needs. This “Go Shopping” mechanism has really circulated a huge amount of money into the economy but at the same time, it has indebted American households heavily. It’s always better to stay out of credit card pay off delay process. With average a debt of $15,422, America’s debt situation is getting worse. Household debt is always more serious and troublesome for an economy than the federal debt. The problem is at the individual level and it’s really crucial to address this problem at the first place.
Here are a few brilliant ways you can pay off your credit cards faster and save your financial future.
Prioritize your liabilities
First of all, list all your credit cards and pay the minimum amount on all of them. Then analyze all your credit card statements to check the variety of interest that you are being charged by different credit card companies. If possible, try eliminating the cards with highest interest rates first. Don’t let the interest rates trouble for a long period of time. Pay off all high interest bearing cards at the first place and complete the list accordingly.
Consolidate your debt
You should take debt consolidation into account if the high interest rates are helping you to pay less than the total minimum. With lower interest rates you will be able to pay your balance without increasing your payments.
Create a budget
Record your daily transactions and keep track of where your money is going. Identify the magnitude of amount being spend for different purposes and find ways to save your money. This doesn’t happen automatically, you need to have a budget for this. You also need to compare the actual spending with the budgeted spending and intervene if major deviations are witnessed. Budget will help you tracking your expenses on different activities and you can make necessary cuts in your expenses. Use this saved money to pay off your credit card bills.
If you have less debt, you would be more regular in paying off your credit card bills, which will help you establishing a good credit score.
Don’t be a stupid
Are you one of those stupids who carry credit cards liability at 10-20% interests and keep savings in a savings account giving 1% interest? If yes, you need to think again. I know we all need some secured funds for emergencies but there are better options available. Wouldn’t you be called a smart decision maker if you use your savings kept at 1% interest in bank to pay off your credit card dues costing you 10%-20% interest? I would definitely consider you as a genius if you do that. Anticipate the expenses that you might have to incur in next month and keep that amount in your savings account. The rest you can use to pay off your credit card debt.
Use retirement account to pay off debt?
Well, not retirement account would pay you more than 10-20% interest. If you are paying a 20% interest on credit card debt, it would make more sense to rule out the debt by withdrawing your blocked money from retirement account. It’s always better to save 20% interest payment than keeping your money without any use in 401K. I am not against the retirement plans, in fact, every individual should save substantial amount for the retirement. But you need to take a wise decision to maintain your financial health sound.
This is not the best way to pay off your credit card debts nor I recommend it. But if you are paying a sky rocketing interest, this option should be considered once. If you are considering this option, consult your financial planner once as it involves many formalities and rules.
This is one of the easiest way to pay off your debts faster, provided you are ready to work more. If your current income is not able to serve your needs, you need to increase your income. The only way to increase your income is that you have to find another avenue. You can do a part time job or some assignments for some companies to meet your additional monetary needs. You can also serve extra hours at your current workplace provided they pay you extra for the same (If you are getting paid on hourly basis, you will get paid for extra hours served).
Reduce your expenses
Look for those expenses in your monthly budget which are not the priority. Spend only if you really have to and only if you are going to utilize it completely. If you are not attending gym regularly, there is no point in paying yearly/monthly membership fees. You can eliminate gym membership expense and adopt natural exercises. Majority of Americans spend substantial amount of their income in eating out. Is it necessary to dine out very often? Probably your laziness tempts you to do that but it can be controlled. If you go out to have lunch/dinner thrice a week, make it once a week, you will be able to save a good amount.
Be a sensitive and a price conscious customer. Look for the value for money in everything and spend only if you feel it’s worth spending.