You need to change your spending habits.
Imagine that at this very moment, someone gives you enough money to pay all your debt. You think, Wow, that’s great, and once you have your debt canceled and with a new limit on the card, you fall for purchases again.
This is exactly what I mean when I say that getting into debt on the card is a dangerous habit! If you don’t change your spending habits, even if you manage to pay the debt, you will quickly create new debts. This is why it is so important to work on your mind first and on your habits.
Let’s go for the action plan to end the debts on your credit card:
Calculate your total debt
Take all your cards, and check the balance on each one of them. Write these three things down:
- Card name,
- How much do you need to pay (i.e., the total amount of the card debt),
- Annual interest rate.
Then add it all up, to find out your total debt on all cards. Once when you’re done with this, it’s time for the second step.
Make a budget
On the one hand, write down all your sources of income and their amount—for example, salary, income from your business, online activity, product sales, etc. Then add everything together to get your total income. This is the money that reaches your pocket.
If you do not have a stable income, because you are an entrepreneur, a freelancer, or you work for commissions, then write down the minimum you are earning each month, or add what you have earned in the last six months, then divide it by six and write down the result as an average salary.
On the other side, write your fixed expenses for the month: rent, energy, gas, telephone, etc. and also your variable expenses: food, hygiene, fun, etc. Then add them all up to find out your average amount of expenses for the month. This is the money that comes out of your pocket.
Start by cutting expenses
Analyze the list of expenses you’ve done before, and find where you’re spending too much. They can be purchases, visits to the restaurant, television cable, new clothes, etc. This is a difficult time because you need to decide which of these expenses you are going to reduce or cut.
You are in this place because you have spent more than your income allows. If you want to get out of debt, you have to cut all unnecessary expenses. If you don’t change anything, then don’t expect your debt to go away. Repeating the mantra, I have no debts is not enough.