If you read any of my content you know, I’m familiar with credit cards. They and their associated debt are the main reasons I started this blog. I received my first credit card when I was eighteen and in college. My parents gave me a card linked to their account and were told to use it for emergencies. I respected their wishes and only used the card when I need gas to commute to campus, or textbooks for class when cash was not available. I avoided going overboard because I knew my parents had to pay the bill and would be watching my spending habits.
You could consider them my accountability partners, but at eighteen I didn’t want to deal with explaining how I was spending their money. I soon was able to apply and be approved for my own credit card, back in those days credit card companies use to set up shop right on campus and offer all kinds of free swag to get you to fill out an application. I recall being so proud of that first card and on the front of it displayed in embossed lettering “Member Since” That was a big deal to me, and to this day I still don’t know why. I had that card for almost eighteen years, until I figure out the one secret to getting out of credit card debt, stop using credit cards.
Change your Behavior
I realize to say stop using your credit cards is super simple, but is it? In my experience, it was not. I thought about this for a few years, but I figured I was smarter than that. I first tried to consolidate all of our credit cards to a single loan, having one easy payment to track each month that worked for a little while until the first emergency show up, and with no cash saving, I used a credit card to cover the cash shortage. Once I swiped that plastic it was easy to fall back into old habits, spending beyond our means, using credit cards to inflate our lifestyle. The impulsive let’s go out to dinner felt right in the moment because I had a stressful day at work and my wife a crazy day at home with the kids, but paying for the convenience of those burgers and fries for the next ten years really wasn’t worth it.
I was still on the quest to outsmart the system and the credit card companies so with a consolidation loan in tow, and a credit card nearing it max credit limit, I did the next logical thing, I applied for another credit card and was approved. This type of behavior continued for years until at age forty, married and a father of three children we had accumulated $109,000 worth of debt.
If at any point I would have stopped using the credit card two things would instantly happen, I would stop acquiring new credit card debt, and my existing credit card debt would begin to decrease. Just with that simple step, but as you can see that step isn’t so simple, it’s clouded by fear, stress and the unknown. The fear of how will I pay for things if I can’t use a credit card, the stress of where will the money come from to buy dinner out, and the unknown of how to live a life with the safety net of credit cards. I believe it all comes down to changing your behavior and relationship with credit cards. Once you are mentally ready to do so, you can take control of your financial situation once and for all.
Once we had that moment, which for us took being backed into a corner and being out of borrowing options, a moment I like to refer to as our rock bottom moment. I knew a change was in order. To protect myself and my family from our bad choices with credit cards we cut ours up. It was the only way to prevent us from using them again. I’ll be honest it was tight those first few months, finding ways to make our cash stretch to cover our bills, and learning to say no to ourselves. After taking a hard, and organized look at our spending we were able to make cuts, things that were nice to have, but not necessities. That change in behavior freed up cash to be able to save some money to fall back on in case of an emergency, and with that, we survived without credit cards for the next five years.
Beyond Just That One Thing
No matter what your vice, drugs, alcohol, food, debt, smoking, etc. the first step I believe is the mental piece of it. You need to want to make the change in whatever behavior you are involved in. Once we did, there were a few months of an adjustment period, learning curve and then things began to smooth out. Now to be truly successful paying off credit card debt or any debt for that matter you need to go beyond stop using the cards. Here are the additional steps that we used to tackle our $109,000 worth of debt.
Build a Plan – Now that you’ve mentally and emotionally ready for the change you need to build a plan. The best way is in the form of a budget. I started mine on an excel spreadsheet and still use it today. You can jot it down on paper, use an app or software like Personal Capital, but whichever way you choose you need to get your total income, debt and expenses down in some format. A budget could take time to evolve, and you may want to track your spending for 30, 60, 90 days saving all receipts to see where your money is going. You may be surprised at some of the dollar amounts of some categories. They could be much higher or lower than you originally estimated. This is why tracking all spending over a period of time is helpful.
Communicate and agree on the Plan – If you’re single you’re in control of your own destiny, but it might be useful to get an accountability partner. Someone who can help keep you on track, or at the very least bounce idea off of. When in a relationship it’s so important to be on the same page with your spouse, partner, children, etc. when making changes like this. I was the one who initiated the plan for us, but before we started anything, I reviewed it with my wife. We compromised on some things but came away with an agreement on our money and budget that we were both in sync with. Then, we looped in our three children, so they were aware of the changes and to help start to educate them about all things personal finance related. Communication is not just a one-time thing. It’s ongoing every day. Our family talks about money and budgets all the time.
Define a Why – Changing your behavior and getting out of debt will not be easy. It will take hard work and sacrifice. It’s a good idea to discuss the “why” for these changes. Having a “why” a goal that you are trying to achieve will help keep you focused and motivated. Our why was to stop living paycheck to paycheck, build a better financial future for our family and teach our children better money habits.
Stop building New Debt – You cannot get out of debt if you continue to add new debt. You have to break the cycle. You do not want to dig yourself further into a hole. You want to begin climbing out immediately. It will be challenging to break old habits, change your behavior, but once you save a cash cushion, it becomes easier to stay out of debt.
Wants versus Needs – Once you have a clear understanding of the budget and all expenses, it’s time to prioritize the costs into two buckets either a want or a need. Food and shelter are needs, the new 60-inch television or pair of shoes are wants. Once you organize your expenses in these two categories, you will find items to cut. These cuts will be month saving that can be used for paying a debt or for savings.
The key to remember is you can afford anything, and you just can’t afford everything.
Emergency Fund – Or as I like to call it a peace of mind fund. You need to have some cash saving for when life happens or Murphy come to visit you. We never had an e-fund before 2010, and when an appliance broke or we got a flat tire it was stressful. We didn’t have a plan for these things, and we had to scramble to find the money to pay for it or use a credit card. A $1000 saving will cover must events and reduces so much stress and avoid money fights you will have no idea until you have the e-fund in place.The key to remember is you can afford anything, you just can’t afford everything. Click To Tweet
Pick a Method to Pay off Debt – The debt snowball is the method we chose to pay off our debt. The debt snowball is a debt reduction method where one owes on more than one account and pays off the accounts starting with the smallest balances first while paying the minimum on more significant debts. After the smallest balance is paid off, the payment is snowballed to the next smallest debt. This method helps build momentum. This worked best for us. Others use the Debt Avalanche method where you pay off the balance with the highest interest rates first. Any way you choose to pay off your debt is fine, as long as you are not adding any new debt along the way and adding as much additional money as possible to your repayment is the key.
One piece of information I found interesting is that most banks and credit unions offer free credit counseling. Check with yours, and they can supply you with additional advice and information that you may find helpful. You can always speak with your creditors yourself and request an interest rate reduction. The best approach is, to be honest, and be diligent. Don’t give up after the first “no.”
Build Wealth – Once you have completed your debt repayment, you will have a surplus of income each month to do what you want with. I would recommend building wealth. Increasing emergency fund saving is a significant first step, to cover you for when more significant life events happen. Could you survive a job loss? Build retirement saving, by investing. Save money for college, a house, a vacation, a car, etc. The possibilities are endless once you free your income up to spend on your priorities and not minimum payments.
I hope you find this information helpful. It was really the key for our success in paying off our $109,000 worth of credit card debt. If you are stuck in debt and need help, please feel free to reach out I’d be happy to help.
What the biggest amount of credit card debt you have ever had? What other tips would you add to help someone get out of credit card debt?
Brian is a Dad, husband, and an IT professional by trade. A Personal Finance Blogger since 2013. Who, with his family, has successfully paid off over $100K worth of consumer debt. Now that Brian is debt free, his mission is to help his three children prepare for their financial lives and educate others to achieved financial success. Brian is involved in his local community. As a Financial Committee Chair with the Board of Education of his local school district, he has helped successfully launch a K-12 financial literacy program in a six thousand student district.