The best way to get out of credit card debt fast is to follow the 3 steps I’m about to share with you.
I don’t know about you, but sometimes when I face a daunting task I waste energy and time. Sometimes I spend too much time thinking about where to start. Other times I use the shotgun approach rather than focus my efforts. When I do that, my results are diluted too.
Thankfully, this doesn’t happen to me too often now. Why? Because now I map out a plan before I start down any path. If you are looking for the best way for to get out of credit card debt fast, here’s your map.
1. Forgive yourself.
That’s right. Before you do anything, you have to start forgiving yourself for racking up the debt. What’s done is done and you have to let it go. Why is this the first and most crucial step?
Because if you don’t forgive yourself, you’ll eventually restart those evil spending ways once again. This will happen because when you feel guilty and bad about yourself there will only be one way to relieve that pain. You guessed it…spending. That’s why people think they don’t know how to stop spending money. It’s often because they walk around feeling guilty.
Instead of wasting time feeling bad about yourself, feel good about taking steps to get out of debt – starting now.
2. Get equipped.
To get out of credit card debt, you need to put the proper tools and systems in place. The “tool” I’m referring to is a system that will allow you to keep a watchful eye on how you spend money. Some people will tell you to write down each expense on a piece of paper. It’s great advice, but it’s hard to do and pain in the arse.
Another more manageable method is to use the “envelope method.” Using this method, you simply put money into a few envelopes each week or month. If you are willing to spend $100 on groceries that week, you put $100 in that envelope. When the $100 is gone, you don’t buy any more food – until it’s time to replenish the envelope. You would set up an envelope for each category of spending. This is a wonderful method, but if you find it too tempting to have all that cash around, it may not work.
My preferred method is to use a budgeting software package like YNAB that captures all your spending data and also helps you set up budgets.
Whatever tool you set up, it’s no good unless you use it – this is one of the main benefits of using the YNAB software. It’s easy to maintain.
Anyway, make sure that you work on Steps 1 and 2 before you advance to Step 3. You have to let go of the past and have a system to track your spending and set up your budget before you go any further.
3. Slash the cost of existing debt.
Once you’ve gotten your spending and budgets in place, let’s whittle away the cost of your debt. You can do this in a few ways. First, you can transfer existing debt from high-cost cards to lower-cost cards or credit card alternatives like Lending Club (for more information, see my Lending Club review). This is becoming increasingly more difficult to do, but it’s still worth a try.
Next, you can go tap into equity you have in your home by taking out a home equity line of credit. You may find this difficult to do right now as well.
A third alternative is to go to your family. Show them you’ve gotten your financial house in order. Show them your budgeting system and that your spending is back in line. Ask them to loan you money at a lower and more reasonable rate. Show them how you’re going to pay them back and then really pay them back.
There is also a neat little alternative to credit card debt I wrote about not long ago. Many people use peer-to-peer lending in order to reduce their credit card debt expense. It’s a very smart thing to do for the right person. I’ve seen a number of people who can save more than 50% on their interest expense by taking advantage of this alternative. Use that interest savings to pay off your debt quicker.
What steps have I missed? What is your secret to getting out of credit card debt?