Tips for Escaping the Consumer Debt Trap
Research has revealed that Americans collectively owe more than $1 trillion on credit cards alone – this doesn’t include other amounts owed on store cards and other forms of debt. If you’re unfortunate enough to be carrying a substantial amount of consumer debt, chances are that you’re thinking it will be impossible to become debt free. However, the following tips and advice will help you claw your way out of the consumer debt trap over time.
Determine how much you owe
Before attempting to repay all of your debts, it’s crucial that you know exactly how much money you owe on various store cards, credit cards or even outstanding medical bills. The easiest way to determine this will be to pull bank statements, credit card bills, store account statements and any other statements from institutions that you owe money to.
Although it can be scary to see all of your bills facing you at one time, this will be the only way to see exactly how much debt you have.
Set Up a Repayment Plan
Once you’ve determined how much money you owe, you’ll need to set up a plan to ensure that everything will get repaid over time.
Although the debt snowball method is usually recommended for repaying outstanding bills, it is not the only option. This method involves starting with the credit or store card that has the smallest amount owing on it and repaying as much as possible on the balance each month, while paying minimum require payment amounts on the rest of your debts.
Another option you may want to consider is determining which credit or store account charges the highest interest rate and repay that specific one down as quickly as possible, while paying minimum amounts on the rest. Over time, this could save you a fair bit of money in interest charges – which can in turn be used to repay other debts quicker.
Inquire about Possible Balance Transfer Options
While it may seem counterintuitive to open another credit card, there may be cases where obtaining a balance transfer option to a 0% interest account could save you thousands of dollars in finance charges. Many credit card providers are so keen to attract new clients that it’s often possible to obtain a deal offering 0% interest for anywhere up to 24 or even 36 months in some cases.
Quit Using Credit Cards
The only way your credit and store cards will be fully repaid is if you commit to not taking on any new debts. It’s no use setting up a payment plan if you’re simply going to use your available balances again. Instead, save up and pay cash for large ticket items you want to purchase such as a new TV, replacement vehicle or that new couch you’ve been eyeing out. Your budget will thank you in the long run.
If you’re keen to create a better financial future for yourself and your family, but aren’t sure how to start doing so, contact us today. We will be more than happy to assist you with setting up a realistic budget and savings plan.