The average credit card debt in America is between four to six thousand dollars. With a debt that large, paying only the minimum payment could take up to thirty years and thousands of dollars in interest. Regardless of income, there are some ways to minimize credit debt without sacrificing quality of life.
If you feel that you are burdened with an overwhelming amount of credit card debt, there are three things you can do to insure a financially stable future. First, you will need to create a financial worksheet for you or your family. Secondly, you will need to contact your creditors. Most people are not aware that if they are having difficulty making payments on their credit cards, contacting the creditors can result in lower interest rates. Some creditors will alleviate late fees if that means the customer will start making regular payments. Lastly, you will need to define your financial goals and build up a cash reserve to insure a credit burden does not happen again.
Building a Financial Worksheet
There are three components to a financial worksheet.
A Monthly Spending Log
For one month, record how much you are spending each day. Write down the name of the items. Be very detailed when doing this, because you will need this information when you are doing the second part of your financial worksheet. Include any bill you pay, and include any bill that is automatically deducted from your paycheck or bank account. Don't forget to write even the cheapest of items in your log, including vending machine items, ATM fees, stamps, and coin laundry. At the end of the month, you might be surprised to find that you spent over $100 in vending machine items.
Income/ Expenditure Calculation
Get a copy of all the pay stubs for the people who contribute to the expenses in your family. Using your monthly spending log, write down how much money you are spending each month. Then, subtract that amount from your total income. If you have a positive amount, you should be able to apply this toward your credit debt each month. If you have a negative amount, you will have to look over your monthly spending log and prioritize the items on which you are spending your money.
Final Goal Sheet
Review your monthly spending log, and on a separate sheet of paper, eliminate or minimize some of the unnecessary expenses such as fast food, vending machine items, coffee shop coffees, extended internet and cable services, and expensive vanity expenses. You do not have to completely eliminate the things you enjoy, but you should decrease the regularity of purchasing these things, or find less expensive alternatives. Write down different ways that you can save money, such as using coupons, walking to work or other places (if that is an option), going to the library instead of buying books, and limiting long distance calls. Once you have re-evaluated your expenditure list, subtract that amount from you total income. You should now have a number that is much bigger than you originally had. This new amount is going to be what you must send off to your creditors each month.