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Before we get into this, let me ask you a few questions about your credit card debt.
1. Are you carrying a balance on your credit card from month to month?
2. Has the minimum payment on your card become so high that you now pay hundreds or even thousands of dollars each month in interest alone?
3. Did you request a credit line increase or open another credit card because your original card was completely maxed out?
If you answered yes to any of these questions, you're probably really stressed out about money and want to be done with your debt for good.
Who wants to pay interest on things they bought months or even years ago? I know I don't and I doubt you do either. That money could go towards something really valuable, like traveling or investing.
If you're ready to change the game, stop overspending, and pay off your debt once and for all, here are five things you need to know.
1. You Need to Know: Your Friends and Family Also Have Credit Card Debt.
Being in debt can feel lonely but that's only because people tend not to admit when they have it.
Money isn't something that people are comfortable talking about but the numbers speak for themselves. About 38% of all U.S. households have credit card debt. That means some of your close friends and family members are in the same situation as you are.
You might feel ashamed or embarrassed about your debt too, but you shouldn't.
Incomes are not keeping up with the cost of living and there's a very good chance your debt is a result of that. Do you feel like you're struggling to pay for the necessities with your current salary? If so, you might fall into this category.
But people get into credit card debt for a number of reasons and that's just one of them. Most of us don't know the complexities of credit card debt or the best solution because we bury the guilt rather than discuss it.
It's time to shake that shame! Talking about your debt openly could help you feel less alone in your struggle and also provide you with the motivation and accountability you need to pay off your debt faster.
If you don't feel like you're ready to talk to a friend or family member about your debt yet, that's okay too. Personal finance is definitely personal and that's why working with a professional might feel more comfortable.
At inVibed, all of our Wealth Coaches and clients sign a Non-Disclosure Agreement, which ensures your personal information is protected. We provide assistance, education and planning with zero judgment and share the same goal as you — tackling your credit card debt! Click here to learn more about our membership services.
2. You Need to Know: You Can Pay Off Your Debt!
When you log in to your bank account and see your credit card balance staring back at you, your stomach sinks. You're sure there's no way you're ever going to be able to pay off that debt. But you can!
There are so many success stories of people paying off their credit card debt in a few years or even months. Some of these people are even on entry-level salaries when they achieve debt freedom.
How do they do it?
Some choose to refinance their loans and get a lower interest rate. This allows them to save money and pay off their debt faster.
Others make serious lifestyle changes to free up more money for debt repayment. This might include cutting back spending in certain low-value categories or getting a side hustle to earn more money.
Anyone can get out of credit card debt if they are motivated to do so. If you are taking the time to read this article, paying off your credit card is obviously important to you. Now you just need a plan to make it happen.
3. You Need to Know: The Minimum Payment is Not Enough.
I just mentioned that you need a plan to pay back your credit card debt. Making the minimum payment each month is an example of a bad plan. (Sorry!)
Only paying what is required each month is a dangerous game to play. If you keep it up, you'll be paying thousands in interest on purchases you probably can't even remember at this point. And that's the best-case scenario.
Sometimes, the minimum payment is not even enough to ever pay off your credit card. WTH?!
Yep. In some cases, your minimum payment doesn't even cover the interest you owe and could essentially keep you in debt forever.
If you're really ready to eliminate your debt, you need to start paying more than the minimum payment each month.
4. You Need to Know: Building an Emergency Fund is Key to Paying Off Credit Card Debt.
When emergencies hit, do you reach for your credit card instead of tapping into your savings?
46% of adults would have trouble coming up with $400 to pay for an emergency.
It's important to have enough money saved so that you aren't relying on credit cards whenever you have unexpected expenses.
This is one of the reasons why we work with our clients to set up an emergency fund while they are paying back debt. When you have enough savings to protect yourself in the case of an emergency, you won't re-enter the debt cycle after you're debt free.
What is a good savings goal? Having enough money to cover your fixed costs for three to six months is ideal.
5. You Need to Know: You Need a Payoff Date.
If you say to yourself, “I want to pay off my credit cards” you probably won't. It's necessary to set a goal and come up with a payoff date. For example, “I am going to pay off $10,000 of credit card debt within 10 months.” This turns a “wish” into an actual goal and helps you stay on track.
When we're working with our clients to pay off credit card debt, we determine exactly how much they can allocate towards debt repayment each month and then create a plan with concrete payoff dates.
This plan includes prioritizing which debt to pay off first and finding hacks that can reduce the overall amount of interest paid.
If you want help paying less interest and paying off your debt faster, schedule a free consultation to learn more.