It’s not sage advice by any means. You can eliminate your debt by not spending money you don’t have. It seems like a simple solution, doesn’t it? Stop spending money you don’t have. But how do you spend money you don’t have? Well, if you have a credit card, that’s money you don’t really have. I have been successfully eliminating debt from my life the past four years by not spending money I just don’t have.
I have a credit card that just a couple years ago had over $6000 on it. It had a $9500 limit on it. If you don’t think that affects your credit negatively, think again. If you check your credit report, it says somewhere in the report that using more than 50% of your credit will affect your score in a negative way. So needless to say my credit was less than par. Over the next several years, about three, I took action to eliminate my debt. It’s now January 2010, and my credit is in good standing. Not great standing, but good standing.
There will be times when you have to use your credit card, obviously. Even over those past three years there were times when I had to spend money that I just didn’t have. It happens. And it’s okay when it happens. Being in debt is no fun and it takes a lot of effort to get out of debt. Especially when you make very little money and emergencies beyond your control happen that simply require you to use your credit card.
Now if you’re the kind of person that likes to enjoy life, you have a significant other that likes to enjoy life along with you and you both want to treat yourselves to a little extravagance every now and then, such as on a birthday. That’s not what I mean by having to spend money that you don’t have. Sure, you regretted the next day; but at the time its great fun.
That’s how you get into debt.
Well last week I had just such an emergency that required me use my credit card. And now I am five years longer in debt than what I had projected. My projection was to be out of debt by this June. But my car starter with oil leaks, about $1100 worth of oil leaks, and along with that several other expensive repairs needed fixing to the total cost of about two grand. My car is 20 years old. It’s probably not uncommon that it has these problems, but I was really wanting to be out of debt and to have a little bit of time to enjoy my extra income.
I know how to eliminate credit card debt. I know how to pull myself out of the muck, shake myself off and move on like nothing happened. One of the reasons I started this blog was to show people like you, and if you’re reading this you’re probably in debt like I am, how to get out of debt quickly and painlessly. Now, you have five more years to my service. It’s a new slate, there is new debt. Now you have a chance to watch from scratch as I will work my way out of this new debt.
Total debt to date: $17,000.
How long to total debt elimination: five years.
Now five years, you can easily eliminate debt from your life in that timespan, especially as little as seventeen grand. That’s about $3400 a year, divided by 12 is about $284 a month. What I’m going to do is take my monthly income, calculate how much free money I have at the end of the month and take 10% of that money and add it to that $284 a month.
I don’t have those figures in front of me at the moment, so I’ll just use a ballpark figure to figure out exactly how long I can eliminate debt from my life, or at least eliminate my current date. Let’s say after your rent or mortgage, your utility bills, car insurance, Internet, cable, cell phone bill, food, gas and credit card bills, you have $600 left over. Let me first say that if you have that much money left over at the end of the month you should not be in debt. That’s a substantial amount of money to have freed up after all those bills. So with my example, taking 10% of that money, which is $60, and adding it to the $284, you know how $344 to pay on your debt per month. Doing the math to eliminate your debt, you should be debt free in just over four years.
Four years still pretty long time. If it were me, I would use about $500 and add to the $284. That would give me a credit card debt elimination goal of one year and eight months. But that’s just me. Thing is 10% is enough to help you eliminate your debt faster. One reason is that by paying off more than what your minimum is, you cut down on the interest that you owe. That’s what kills you. Interest on a $5000 loan can end up costing $8000. Now I made that up off the top my head, but that’s how interest works. That’s how credit card companies make their money. That’s how you stay in debt.
So let’s look at three things we can do to help eliminate credit card debt from our lives and have the freedom to make the purchases that we want and do the things that we want and have the life that we want.
Number one: The first thing you can do is stop using your credit card. The moment you stop depending on that card, the sooner you start your climb out of debt. Credit is everything these days. Every bill you pay, don’t pay or pay late on determines your credit score. Your insurance premiums are determined by your credit score. Renting a house, buying a home, leasing a car purchasing a car, your ability to do any of these is determined by your credit score. You need a good credit score to be able to afford things that you want in life. The fastest way out of debt is to stop depending on credit cards. The sooner you stop using your credit card, the sooner you’ll be independent of it and the sooner you’ll eliminate debt from your life.
Number two: Assess your expenses. Figure out where you’re spending money that you don’t need to be. Eliminating credit card debt requires sacrifice. Maybe that means giving up cable for a month, maybe it’s one bottle less of wine per week, maybe it’s taking the long way home instead of paying the tolls on the highway. Whatever it takes to eliminate excess spending from your life will help you get rid of the debt faster.
Number three: Spend your savings. Why are you saving money if you’re in debt? Put that money toward your debt and you could cut out a large chunk without even trying. You don’t need debt elimination programs. Free use of the dead is a common sense goal. You may not like the sacrifices, but the end goal is the sweet release of being debt-free. Within a couple of years, you could start to enjoy the things that you liked before you were swamped in debt.
If you find it too hard to take the steps on your own, then perhaps you should look into a debt elimination program that can help you achieve your goal. There are ways to eliminate that from your life and still maintain a healthy living without too much sacrifice. All it takes is a little planning, and before you know it your successful snowball to your financial freedom.
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