REFOCUSING Your Finances Week #3-Eliminating Credit Card Debt

The next category in your expenses is E and it stands for eliminating debt.  Clearly the goal is not to reduce what you put towards debt by 10% each month, as that would only cause the debt to grow.  Your goal here is to eliminate the debt so that this item is no longer a monthly expense for you.  Remember, I am not a financial advisor and these are my personal opinions on how to tackle credit card debt.

1)     Which to Payoff First.  List your credit card debts in descending order based on which card has the highest interest rate.  Start putting extra money towards the card with the highest rate, while maintaining the minimum payments on the rest.  When the card with the highest rate is paid off, start working on the next one.

2)    Try to Consolidate.  If you have a good credit score, you may be able to consolidate your credit card bills by getting balance transfers from the card with the lowest rate.  This will eliminate some of the higher rate cards and reduce the number of payments you have to make a month (which will feel better psychologically).

3)    Negotiate.  Again, with a good credit score, you may be able to negotiate a lower rate on your cards.  If you threaten your credit card company with a balance transfer to another institution, they will be more likely to work with you. 

4)    Budget Overhaul.  Credit card debt is likely to be one of your most costly expenses.  Whatever money you can save in other categories needs to be applied to credit card debt.  If you save $20 by skipping lattes, don’t spend it on a new pair of sunglasses.  Refocus your energy toward paying down debt so that you can move forward financially. 

5)    Get Creative.  If you are really serious about getting out of credit card debt, you need to get creative.  Get a roommate, take the bus/ditch the car, sell things on EBay, and stop drinking coffee.  Whatever sacrifices you can make today to reduce your credit card debt, the better your future will look.

After you have an emergency fund, every penny that you can shave off of your other expense categories should be put towards your outstanding debts. 

What tips/tactics have you used to pull yourself out of credit card debt?