Credit Free

Live a Debt-Free LifepaidInFull

The average U.S. household has more than $15,000 in credit card (“revolving”) debt. At a “reasonable” interest rate of 15%, this could easily cost each household over $2,000 just in interest. This amount of revolving debt can also lower your credit rating.

Here are some ways to cut down your debt. And they work, if you adhere to them.

1.  Create a Budget

The first step in addressing any debt problem is to create a household budget. Check out our LAPD budget which you can download here. In order for a budget to be useful, you have to be honest with yourself. Don’t overestimate your income and use your past bills to accurately estimate your monthly costs.

2.   Stick to your Budget

Before you add more debt to a credit card or take out a new vehicle loan, make sure you (your budget) can afford both the initial cost and the interest costs.

3.  Use Cash

Folks spend significantly less when they are using green backs vs. green cards.

4.  Always Pay More than the Minimum Balance

Paying the minimum on a credit card can mean you’ll be paying it off for 7 years! A good rule-of-thumb is to pay at least 2x the minimum. Better yet, pay off small balances.

5.  Pay Off the Most Expensive Debt First

Create a list of all your debt, credit cards, vehicles, toys, home, etc. that includes the name of lender, the current balance and interest rate. After paying at least the minimum on all debt, use any additional monies at your disposal to pay down the debt with the highest interest rate first.

6.  Stop Using Your Credit Cardsmorerope

This is really a mind-set challenge, but most folks are capable of handling it. If you don’t have the money in the bank (or cash on hand), don’t make that purchase. If your self-control needs a boost, keep the credit cards at home when you go shopping. Consider destroying a credit card if you need even more “will power.” Keep in mind, just as excessive debt can hurt your credit score, closing accounts can have a similar affect. Curtailing your access to the card may be better than closing the account altogether.

7.  Change your Habits.

Buying ‘stuff’ can be addictive. It can also be mindless, that is, you can do it with very little intentional contemplation. Not tracking your spending on a daily basis can easily lead to a risky habit – overspending and indebtedness. Review your budget three or more times per week … make it habit and you’ll be less likely to spend mindlessly or impulsively.

8.  Reward Yourself When you Reach Your Goal

This doesn’t mean charge your cards up to the max. But when you’ve reached a significant budget goal, find a cost-effective way to reward yourself for your hard work.