Credit Card Debt – Celebrate without the Hangover

Make no mistake. Debt is a crippling self-induced millstone that you place around your neck. If you are not very careful that $1000 you add to your credit card bill to enjoy Christmas and the New Year will have you paying three or four times that (thanks to the banks for charging an outrageous 18+%pa interest rate). That cumulative interest can hurt you for years to come.

The most debilitating debt is, the easily obtained, ‘credit card debt’. The sooner you free yourself from credit card debt the easier your financial life will become.

Debt is easy to get into, but it takes dedication and discipline to break free from it.

So, here are some basic rules for reducing credit card debt:

1. Always pay more than the minimum amount.

2. Set a budget that does not require you to use credit cards at all unless in absolute emergencies.

3. Live within your means. Save for things you want rather than borrowing for them.

4. Set milestones to mark your debt reduction achievements and reward yourself when you have achieved them.

5. If you have more than one credit card, focus on paying one off at a time, starting with the smallest, while paying minimum payments on the others. When you pay one off – apply the payment you were making to the next smallest and keep following this strategy until all debts are clear. You will then have established a disciplined savings pattern that can be applied in more beneficial ways.

So as we look forward to the New Year, it’s a really good time to commit to reducing your debt. This increases your saving and investment capacity which in the long run, provides you with more to spend. The ideal situation of course, is to avoid the debt hangover in the first place.

Give yourself a valuable lifelong Christmas present this year and commit to taking control of your financial life.