Lets talk about debt. The expensive kind that we have all fallen into the trap of. Credit card debt. Yuck.
Lets not forget that Credit = Debt. Not to worry, we’re about to pay it all off.
No-one is saying that paying off debt isn’t easy, there are no shortcuts, there may be bumps along the road but you can get there. It is simply a matter of discipline, self-discipline and remember you somehow got yourself in that position in the first place. You may have had the perfect excuse or reason at the time but that was then and this is now.
Think of credit card as a game, one that you and everyone else who sets their mind to it can win at, let’s call it the ‘Get rid of credit card debt’ game. It’s really simple, you get to be the Winner when you have no credit card debt. Simples. And there’s a prize for the winner, in fact there are two prizes. You want to win right? Good, because this is totally in your control and the only person you are playing against is Yourself.
Before we play it though there are just two rules you need to be made aware of which are written on the top of the box:
- Once you have started playing you can never borrow/cheat/steal money from any source to pay off your credit card debt and yes, this includes not using a new credit card to pay off an old one. This also includes asking your friends and family for help. Nice try.
- You must pay more than the minimum repayment amount for at least one credit card every month.
How to win in 8 easy steps
Step 1: Get some blank sheets of A4 paper. One piece of paper per credit card (yes, including store cards). Scribble down your credit card current debt figure at the top left hand side with a negative sign — and next to it, write down what the minimum repayment amount is and the monthly interest rate is. Now count them all up. You have that many credit cards? No problem, you will soon have none.
Step 2: Re-arrange your papers, starting with the most expensive interest rate first (going left to right). If there are two with matching rates, put the one with the highest debt number first.
Step 3: Take a red pen and put a huge X through your most expensive interest rate paper. This is the one you are going to focus on. Take up your scissors and cut up your matching credit card now. That’s right, you read that correctly. Cut it up, go on. Stick the paper and the credit card bits to your mirror so you see it everyday.
Step 4: Start Paying it OFF now. Not the minimum repayment amount, think of a nice round number which is at least double the minimum repayment amount. Now double it if you think that you can easily afford that. Write it down on the top right in big letters. Can you afford to pay it? Yes, of course you can. You may have to make sacrifices but you can do it. Believe in yourself. Now, stop delaying and pay it off with money that you’ve earned (that’s rules 1 & 2!).
Step 5: After you’ve paid off the amount, add a new line with the new reduced value and cross off the old value.
Step 6: Now increase your repayment by £10. Write that down on the right and don’t forget to cross out the old figure too.
Step 7: All paid off yet on this credit card? Yes? Well done, pat yourself on the back. Raise a glass of water in celebration. Now rip up the paper into tiny little pieces. Do it now, doesn’t it feel good! Time to move onto the next piece of paper.
Step 8: Repeat steps 3 – 7 until there are no credit cards and paper left. Congratulations, you are now a Winner!
Your Prize? No debt (hurrah!) and guess what, you’ve learnt how to live within your means. No easy feat.
8 Helpful Pointers
- Stop whining about this being too hard and outside of your control. Just get on with it. Get into the routine. Take baby steps. It’s only as hard as you make it out to be.
- Give something up (like popcorn at a cinema). Cut down on spend (have one drink instead of four)
- Forget about the next door ‘Joneses’, they aren’t going to help pay off your debt
- Be in control of your emotions. Know what your material cravings, your wants and ‘I must haves’ are.
- Be aware. Think before you spend. Ask yourself, do you really need this? Is there an alternative cheaper way?
- Set up a standing order from your bank current account (you can’t be going into your overdraft, that’s borrowing and against the rules). Set it up for the day after you get paid so you won’t notice it and be tempted to spend it.
- Paid in cash? Go to your nearest post office right away and pay off your credit card
- When you get a bonus, use it to pay off your debt and not get a 42 inch flat TV, you don’t deserve it yet.
Tell me when you’re a Winner!
(and if not, why not? I can’t wait to hear your reasoning)