Are you stuck in the cycle of credit card debt? Learn how to break it once and for all.
According to the Federal Reserve, Americans have accumulated $992 billion in credit card debt (as of November 2016). While many people pay them off every month, there are thousands of others who do not.
They simply pay the minimum and then continue to use the cards, resulting in increasing debt.
If you are serious about wanting to get out of debt, you have to take steps (sometimes drastic) to break the cycle of credit card debt.
- Why Your Credit Score Matters and How to Increase It
- How to Pay off Credit Card Debt
- The Five Mistake People Make When Getting Out of Debt
UNDERSTAND WHY YOU SHOP
It is so easy for someone on the outside looking in to tell you to just stop spending. However, if it were that simple, you would have stopped long ago, right? Before you can stop spending, you have to know why you are doing it.
Your reason could be to replace something missing in your life. It might be the high you get from spending. Your reason is not wrong. It is your own.
Once you understand why you shop, you can then start to work on that, and in turn, your desire to shop as much can slowly fade as well. This is one of the first things you must do finally break the cycle of credit card debt.
Read more: Why you continue to overspend
CUT UP THE CARDS
I know that this is pretty extreme, but the truth is that it works. If you do not have cards to use, you can’t rack up additional debt.
If you are nervous about getting rid of them completely, put them on ice. Literally. Put your credit card in a bowl of water and freeze it. When you feel you need your card, it will be more difficult to get to and the urge to use it may pass more quickly.
USE ONLY CASH
This goes hand-in-hand with cutting up the credit cards. Don’t use either debit or credit, but pay for everything with cash. When you use cash, you have to think twice about what it costs as when the money is gone – you are done spending. This is different than using credit cards as even if you budget $100 to spend, you can always spend more than that.
Read more: Setting up and using a cash budget
SET UP REWARDS
A simple trick to sticking to not using your cards is to set up milestone rewards. For instance, if you can go one week without using your card, allow yourself an extra coffee the following week.
As you reach more and more milestones, such as paying off a card, going six months without using plastic, etc, set up small rewards for yourself.
Just make sure that you never cover the cost of your reward by using your credit card!!
CREATE A VISION BOARD
If you are wanting to get out from under credit card debt, it can be helpful to have a goal in mind. It may be to afford the new car you want or buy a home. It might even be to live without feeling so much stress.
Whatever your reason, create a vision board. When you have a clear vision of what will happen when you reach your goal, the more likely you are to stay on track.
GET AN ACCOUNTABILITY PARTNER
The best way to stop is to have someone to help keep you on track. This is where an accountability partner can prove invaluable.
If you are in a relationship, you will be accountable to your partner (of course). However, if you both have a difficult time not using credit, you might want to look beyond yourselves. Find another couple who is in the same situation as you are and become accountable to one another.
However, if you are single, then it may be a bit more difficult to find someone. Reach out to friends and family to find someone with whom you can connect and help one another be accountable.
TRACK EVERY PURCHASE
This is something that you do when you have a cash budget. But, if you aren’t sure you are ready for that, start tracking every purchase you make. Sometimes, seeing where you spend your money can be enough to make you want to throw the credit cards away for good.
Read more: How to track your spending
MAKE SURE YOU BUDGET WORKS
You absolutely must have a budget. There is no way to get around it. But, more than just a budget, it needs to be a budget that works. Sit down and go back over your budget to see where you may be spending too much and see if you can find ways to make improvements.
Also look carefully at how much money you spend on credit card debt each month. Imagine what you could do with that money if you did not have to send it away to someone else.
Read more: How to create a budget that actually works