When you’re struggling under a big load of credit card debt it seems impossible that you could actually build your savings as well. Here’s the way that you can do both at the same time.
- Stow your cards away. Cut them up if you can’t resist using them, or put them in a big block of ice in your freezer, to be melted only in a real emergency.
- Get a part time job to make some extra money, and consider selling electronics, clothing or anything else that you don’t use or need to increase your cash flow.
- Calculate how much extra money you can afford each month to reach your financial goals. Then earmark one portion for your credit card debt and the other portion for your savings. Once you’ve paid off one credit card, think about whether you want to apply that extra money to your credit card repayments or to deposit it in your savings account.
- Decide on your payoff approach. You have a couple of choices, and only you can decide what provides you with the biggest sense of accomplishment and the right motivation to keep up with your debt reduction and savings program.
Many financial experts advise that you pay off the credit card with the highest interest rate first. The higher the interest rate, the more it’s going to cost you in interest to carry a card balance from month to month. You could also decide to pay off your biggest balances first. The problem with both of these approaches is that could be several months before you see a dent in your debt. It can be discouraging to see that your outstanding balance has barely budged. On the positive side, you will see the amount you pay in interest decrease each month, and you can put that money towards your goal of becoming more financially secure.
If you need the boost of seeing faster results, pay off the credit card with the lowest balance first. You’ll get a real sense of accomplishment when you see a bill come in with a zero balance! When you’ve paid off that one card, move to the one with the next lowest balance and increase your repayment efforts with what you’re saving on the first card.
- Don’t get discouraged. Even if your balances are only inching down each month, you are making progress in getting your debt under control. Think of it this way--you’re already successful because you’re cutting your spending and not adding to what you owe. Same goes for saving. You may be putting only a little bit away each month--but saving a little is much better than not saving at all.
As the months roll by, you’ll be able to apply more and more of the money you’re saving in credit card interest to further debt reduction and/or to savings. That’s when you’ll really start to see the difference that your financial self-discipline is making in your life.