After my final shopping spree on Boxing Day yesterday, I got home and was utterly exhausted. I’m not sure if any of you can relate to my mixed feelings about Christmas. I love all the parties, drinks with friends, shopping and gifts but it’s quite tiring at the same time. Then, last night, I had the real realization about our finances. Throughout the holiday season, I always keep hold of all my receipts. As I’ve said before I’ve had quite a few surprises come January and I’ve been trying to avoid that this year. So, whatever I’ve spent my money on the past couple of months, I’ve kept the receipts and stored them in a good old shoe box. After I got back from the shopping mall yesterday and had my leftover turkey, I decided to take a peek at what I spent already this season.
I had a budget for the holiday season and after I added everything up, I was still about 20% over the amount I was hoping to spend. I decided to take a bath so I could try to relax and not get all worked about it. However, I couldn’t really get my mind off of how I was going to pay off all the bills. I knew that I could figure something out but I was still upset with my overspending.
I decided to sit back and start to build a plan for 2014. Although I did everything that I should have done – budgeted and took note of my spending – I still feel that I could have done more. As I’ve been researching a lot about controlling my debt I know that it all comes down to planning ahead. So, I feel if I start now and get my 2014 off to the right start, I should be in the best position possible.
To start, I sat down and listed all my major expenses. After doing this for a couple of hours, I realized that I have the most issue in managing my spending with credit cards.
So, I decided to start there and make a plan for reducing my debt when it comes to credit cards. I’ve come up with 9 ways that I’m going to manage my credit card debt, helping me reduce my debt overall.
1) Getting real – I’ve decided that I need to face all of my credit card debt head on and keep an active list of my credit card debts. I’ve created a log (similar to a 2014 calendar) that will act as my debt summary that includes the creditor, monthly payment, interest, balance due, credit limit and due date for each loan. I may even consider using a budget binder or something similar to keep everything organized.
2) Understanding the APRs – I’ve gone through all of my credit cards and realize that there include a range of annual percentage rates. This will determine how much interest I’m paying every month. For all the cards that have a higher rate, I’m going to pay those off quicker with a view to stop using the. I’ll continue to pay the minimum payments on all my cards (obviously) but I want to pay off the card with the highest rate first. Then, focus your effort on the card with the next highest rate. After you pay off the card, keep it open, especially your oldest cards. Losing this available credit can lower your debt utilization ratio which could, in turn, lower your credit score.
3) Get in touch – with my research I noticed that some people have actually contacted credit card firms to see they could negotiate a lower interest rate – and they did. The less money I pay in interest, the more money I can use to pay off your credit card balance as well as other bills. I’ll keep you posted on how this goes.
4) Always paying more than my minimum payment on the highest card – since a minimum payment is usually only 2%-5% of your balance it only pays a portion of your interest. At this rate, it will take you many years to pay off my debt. With my Christmas purchases, I’ll definitely need to apply this advice.
5) Look out for balance transfers – I heard that there are a lot of offers at the moment that will allow you to move your balance to another card at a preferred interest rate. To take full advantage of any preferred interest I’ve heard that I’ll need to pay as much as I can above the minimum payment each month.
6) 9-1-1 only – I’ve decided that from now on if I’m running a balance on my credit card, I’m going to stop using it. I want to get into this habit so I can be more mindful of my spending. Sometimes it’s too easy to take out my plastic and doesn’t give me the same accountability as cash or debit. I need to start realizing that when I carry a balance, I am paying interest for every purchase, including clothing, entertainment or dinner. I need to start factoring this into each purchase.
7) Paying my bills on time, every time – I admit that there have been times where I’ve been late in paying off my card. This – I know – is very bad and can lead to paying late payment fees. Also it can appear on credit reports which I obviously don’t want. Negative information like this can result in lower credit scores and higher interest payments.
8) Check my credit report – once I started looking at things, I started wondering why my rates were so high. I realized that I should check my credit report to ensure all was fine. I’ve heard that many people have reports that contain errors that lowered their credit score, causing creditors to increase rates. If I do find an error at least I can take the steps to report it and get it resolved. They must respond to your claim in thirty days or remove the information that is incorrect or unverifiable.
9) Setting a timetable and sticking to it – this isn’t a New Year’s resolution for me, this is reality. I need to set a timeline for ensuring that I pay off credit card straight as soon as I realistically can. Even if it takes more time to pay it off at least I’ll have a goal that I can work towards.
I hope these nine tips help you as you work towards being debt free in 2014. Maybe at this time next year, we can all toast to a year ahead full of greater financial freedom…