Are You Done With Debt?
Gail Vaz-Oxlade, star of ‘Til Debt Do Us Part and author of the forthcoming Debt-Free Forever, has 5 fantastic tips for getting out of the mess you might have made with that credit card burning a hole in your wallet.
Are You Done with Debt?
Take the following test:
If you buy a $2,300 couch using your credit card and you pay only the minimum on the card at 18.99% interest, how long will it take you to pay it off?
3 years 6 years
7 years 10 years
What will the couch cost you by the time it’s paid off?
Short test. Let’s see how you did.
If you buy a $2,300 couch using your credit card and you pay only the minimum on the card at 18.99% interest, it will take you 9.9 years to pay it off and you’ll pay $1,998 in interest, taking the cost of the couch to just under $4,300 once it’s paid in full.
No doubt the couch is starting to look a little ratty, and you may be wondering why you paid almost twice as much as the store said you would as you look at it disintegrating even before it’s paid off. Hey, that’s the power of interest working against you.
Sick and tired of being in debt? Ready to cut off the credit card company and put your money to work for you, instead of for the credit card people?
Make a plan.
Without a plan, you’re simply throwing money at the problem debt without having a clear sense of what you’re trying to accomplish. Start by making a list of all the people to whom you owe money -- your creditors. Put the list in order from highest interest rate to lowest. Make sure you’re putting your greatest effort at repayment against the debt with the highest rate.
Call and negotiate.
If you have extremely high rates on your cards, it’s time to put your negotiating skills to work. Call and describe the pickle you’re in. Ask if the credit card company if they'd be willing to eliminate the late fee and interest for a month or two. Try and get them to lower the rate on your card. If they won’t, ask if there’s another card that they can give you that has a lower interest rate, and transfer the balance to that card.
Pay on time.
Pay at least the minimum on all your debts, and make those payments on time. This will not only help you avoid fees, it’ll stop the interest rate from bouncing up because you’ve broken the rules. And it’ll improve your credit history, laying the groundwork for future rate negotiations.
If you commit to paying at least 10% of your balance every month, you’ll be out of the hole in about three years, before debt fatigue has a chance to take hold. Can’t come up with 10%? Get a second job, or a third job, or a better job. Do whatever it takes. You spent the money. Now it’s time to pay it back. And the longer it takes you, the more painful and costly it will be, so bust your butt to make that debt go away.
Set specific goals.
If you want to stay motivated, set milestones that are achievable and that you can pat yourself on the back for. Maybe you’ll have that department-store card paid off in six months. Perhaps you want to be debt-free before your wedding. Whatever goal you set, write it down and put it where you can see it every day. As you get closer to your goal, the motivation to hit your target will carry you forward.
None of this will work if you keep using your credit cards, so freeze them, chop them up, or hide them behind the washing machine. Find something positive to do with the time you used to spend shopping. Avoid magazines and catalogues that may leave you salivating. Focus on your goal. And if you need a debt-mate to talk you through your spending withdrawal, find a friend who can help steer you clear of the mall and the temptation to spend. That’s what true friends are for.
Debt-Free Forever: Take control of your money and your life!
Pre-order the book today
Written By: Gail Vaz-Oxlade, host of Til Debt Do Us Part