Credit cards can be effective as a tool to build a good credit score or to make ends meet in an emergency, but too many people use them improperly. They end up relying on their plastic to meet monthly obligations or to buy big ticket items. Today, more and more people are giving up their credit cards and finding that it makes life easier.
Paying Off Your Debts
Of course, the first step in the process of breaking free from dependence on credit cards is to pay off your debt. Depending on how much debt you have amassed, you may want to consult Graylock Advisors or another debt consolidation service. If you don’t think you need the help of a service, you can start paying down your debts immediately on your own.
The Snowball Method
This type of repayment plan involves tackling your smallest balance first. As you continue making the minimum required payment on each of your other accounts, work at paying off your smallest debt first. Once it has been paid in full, dedicate that money towards paying the second smallest debt. In this way, you can dedicate the money you were using to pay the previous debt to pay off the next creditor that much faster.
The High-Interest Strategy
An alternative method is to tackle the debts that carry the highest interest rates. In some cases, this may be preferable, because the interest can significantly increase what you owe month to month. Similar to the snowball strategy, concentrate on paying off one creditor at a time, but, in this case, go after the creditors charging the highest interest rates.
Start a Savings Account
Once you have paid off your debts, you will have extra money at your disposal. While it may be tempting to splurge on yourself, it’s a wiser move to open a high-interest savings account. You should be contributing all of that extra cash into your savings account, so you will have it for a rainy day. Instead of using credit cards to buy a new water heater or get your car fixed, you can use your savings. By saving money consistently month after month, you’re more likely to have enough to cover unexpected expenses as they’re needed.
Ditch the Plastic
Now that you have a head start on your savings, Graylock Advisors recommends limiting the use of your credit card accounts. Until you build up a significant nest egg of 3-6 month’s expenses, you may want to hang on to one credit card for real emergencies. That card should be locked away someplace secure and only used if a true financial emergency strikes. Meanwhile the other cards should be stored somewhere where you won’t be tempted to use them at all. These should only be used every 6 months or so to maintain an active account status on your credit report.
Start Investing
As you build up a larger savings account, it will be time to start looking for ways to grow your wealth. By making your money work for you, you’ll be ensuring that you won’t have to resort to credit cards again in the future. There are many ways to put your money to work, so it may be helpful to consult a financial advisor. A professional can help you learn more about investing and teach you how to analyze risks. As you build more wealth, your overall financial profile will become stronger.
Work for the Things You Want
As previously mentioned, one of the ways people amass considerable credit card debt is by using their plastic to buy big ticket items. Obviously, these are purchases that can’t be repaid within a single billing cycle, which means you’ll end up paying massive amounts of interest. Instead of putting yourself in that situation, save up for the purchase and buy it with your own cash. While you may not be able to buy it right away, delaying that need for instant gratification can save you significantly on the interest you would otherwise be forced to pay.
Increase Your Monthly Income
Finally, if you feel as though this strategy isn’t working for you, the problem may be in the amount of income you earn each month. Increasing what you bring home will give you more money to pay off your debts, save for a rainy day, and make those big purchases. You don’t necessarily have to dedicate yourself to a second full-time job. Instead, look for a part-time gig within your community, or research online freelance opportunities. By using your career skills, you may be able to pick up a flexible source of income that will help you achieve your financial goals.
If you have kept your credit cards for more than a few years, getting rid of your
dependence may seem like a challenge. It can be done, though it will probably
take some time. Even though it will be a struggle in the beginning, making the
effort will help you live a life that won’t be as stressful or financially
burdened.