Living beyond your means is always a bad idea—eventually, the bills will get out of control and you’ll find yourself facing a mountain of debt.
Credit card debt can be especially destructive. Miss a payment and your interest rate could skyrocket. But even if you make all your payments, making just the minimum necessary payment could stretch out your debt for years and pile up heavy interest charges. One blogger for The Paycheck Chronicles recently calculated that it would take more than 25 years to pay off $5,710 in credit card debt while making only minimum payments!
So the best frugal living advice is simply to avoid credit card debt altogether. Don’t buy something on credit unless you have the resources to pay the whole credit card bill when it arrives.
Of course, that’s easier said than done—especially if you already have credit card debt. Then the big question is how to get out of debt fast—paying off your outstanding balances and reducing interest costs.
That’s where a recent article on Cash Money Life comes in handy. Blogger Patrick [condenses] a get-out-of-credit-card-debt strategy into a series of easy steps, including:
- Stop using your cards while you pay off the debt. You won’t save your financial ship from sinking […] unless you plug the holes that are letting more water flow into the boat.
- Transfer balance to a 0% interest card. If you can a 0% promotional rate from a new credit card, make the switch. You’ll pay down your debt much faster if you can put a brake on interest charges for a little while. Just be sure to try to pay down as much as possible before the promotional period ends and interest rates kick in again on whatever debt you haven’t managed to pay off.
Patrick’s other ideas including getting organized, setting a budget and making multiple payments each period to pay off the debt just a little faster.
Of these suggestions, the budgeting one is especially important. If you don’t have a budget, it’s unlikely that you’ll stay out of debt for long simply because you won’t have a good handle on cash inflows and expenses. So take the time to map out how much you can afford to spend each month and then stick to living within your means.
Have any of these strategies worked for you? What approaches have you used to get out of credit card debt and stay debt-free?