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HOW TO PAY OFF DEBT

How to Pay Off Your Credit Card Debt

The first and most important step in paying off long-standing debt is not to accrue more debt! Sounds simple, right? But in a credit-driven culture, it can be difficult to lay off the credit cards, loans and other debt-builders, especially if you're constantly struggling to make payments on debts you already owe.

Credit Card Debt

The biggest debt danger is the credit card - easy to get, easy to use, and easy to forget how much you're spending. In addition, most credit cards raise your interest rate enormously the second you make a slip, such as sending a late payment or going over your limit. Then it can become difficult just to pay the minimum amount owed per month, much less eliminate the balance entirely. The solution to credit card addiction is simple, but it's not easy: get rid of them! Try switching to debit-type cards instead; they have all the utility and security of a credit card, without the danger of debt. With a debit card, you can still reserve hotel rooms, hold rental cars, etc., but you'll only be spending money you already have, rather than adding to your debt.

Make a Debt Budget

Now of course you're wondering, "How can I live without credit cards?" The answer is to make a budget. Think about your finances; plan what you spend. We know most of our monthly expenses ahead of time, just as we know our income. Figure out how to live within your means and make a monthly budget. Also, before you go shopping, make a list and stick to it. If you need to buy a more expensive one-time item, use the Internet, newspapers and other resources to find the best deal, then incorporate the expense of the item into your budget. Sure saving the money needed rather than simply putting it on your credit card means you may have to wait a little longer to get that new TV, but you won't be paying for it later either. Of course you can keep one credit card for emergencies, and to help build a positive credit history, but that credit card (or worse, credit card roulette) should not be a part of your regular spending behavior.

Try to Increase Your Income

In addition to decreasing your expenses, you can also try increasing your income. Go through your house, find the things you don't need, and sell them! We all have a set of golf clubs we haven't touched in years, or nice clothes in our closet that we've never worn, or an old game system we've replaced. Rather than letting those things collect dust and clutter your home, sell them, or donate them to charity and get a tax deduction.

Manage Your Monthly Paycheck Better

Speaking of taxes, do you get a hefty tax return each year? If so, you're losing too much of your monthly paycheck to taxes! Sure that big return check is nice, but too often we spend the money and then are right back where we started. Wouldn't it be better to have extra money each month? How often do we lament, "Oh if I only had an extra $200 a month, I wouldn't have to use my credit cards?" By increasing your W-4 tax withholding exemptions, you pay less income tax each month, thereby instantly raising your paycheck and giving you more money to work with monthly, rather than receiving a lump sum once a year.

Take That Extra Money & Pay Off Debt!

Whatever you do to make more money, be sure to apply that extra income towards your debt. Don't change your budget! With a little discipline and a clear-eyed assessment of what you truly need to spend money on, you can be debt-free in no time.

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