If you’re in debt, a lot of times it feels like you keep taking one step forward and two steps back. Every time you make a payment, your bill comes back with enough interest tacked on that your payment is hardly noticeable, especially if you are continuing to use your card. You may feel like Albert Einstein’s definition of insanity fits you to a T. There are steps you can take to break the cycle, starting with paying more than the minimum payments.
Credit card minimums are usually about two to three percent of the outstanding balance. If you’ve missed a few payments, your interest could average about 19% or more. The longer you take to pay off your card, the more interest you are paying and you could end up paying more in interest than you pay on the actual balance itself.
You need to pay as much as you can each month. If you get paid weekly or bi-weekly and you can afford to take a small chunk out of every paycheck, you could be making two or four sizable payments each month. Start with the lowest balance cards first and get them paid off while continuing to make minimum balance payments on the rest. Then move on to the higher balance cards. Be systematic about it. Stop using your credit cards until you get it to a balance you can pay off each month. Analyze your current expenses and create a budget. It’s not going to be fun but it really shouldn’t take too long. Your personal budget does not have to be accurate to the cent. Approximate how much you spend eating out each month, spending on clothing or other luxuries and cut a few things out. The money you’ve saved can be put toward your credit card balance. Once you have finally gotten your balance to where you feel comfortable, consider lowering the limit. If you have a credit card that allows you to spend $2,500, it’s going to be a lot easier to do so, but if you can only afford $500 a month, lower your limit to fit your new budget.
If after careful planning and forecasting, you see that you will be old and grey and the cards will still not be paid off, then talk to a bankruptcy lawyer about discharging the whole lot of them and get your fresh start now so you can start saving for your future and retirement.
In this economy, a lot of people may feel “insane” when it comes to their debt, but you don’t have to be one of the crazies. Just take the time to prescribe yourself with a plan to pay off your cards and work toward a healthier financial state of mind.
Call Attorney Rex Anderson for more advice on ways to get out of the hole at 810-653-3300.
Collaborative Writing by Rex C. Anderson, Esquire and Contributing Research/Writing by Kellye S. Smith