Ringgitsavers.com

How To Get Out of Credit Card Debt!

Most of us often forget how much we earn every month when it comes to spending. This is made worse when credit cards are around. You always swipe them like it doesn’t matter. Everyone wants to look good and go on good holidays, but if you could not afford them, you better off start saving slowly and reward yourself with such luxuries when your savings allow you to do so! But if were already debt-ridden, what can we really do to get out of debt?

Getting out of debt involves several stages:

STOP USING CREDIT CARDS!

This may seem self-evident, but the reason your debt is out of control is that you keep adding to it. Stop using your credit card. Don’t finance anything. Cut up your credit cards now!

That last one can be tough. Don’t make excuses. Destroy them. Stop rationalizing that you need them. You don’t need them for safety net, convenience etc. I was out in Bali, Indonesia and guess what the ATM machines there accept a Maybank card for money withdrawals (it has a “Plus” sign). SO the fact is you don’t need a credit card when travelling overseas! Also you may be saying that you need credit cards to book Air Asia flight tickets online. Well my answer to that is you can always use debit cards such as the one offered by Tunemoney.com or those issued by Public Bank and AmBank. Debit cards are like credit cards but they work on a prepaid concept i.e. you need to put value on it before you can use the card. They still have that visa or mastercard signs!

Credit cards are a trap. They only put you deeper in debt. Later, when your debts are gone and your finances are under control, maybe then you can get a credit card.

After you have destroyed your cards, halt any recurring payments. If you have a gym membership, cancel it. Most of us have gym membership running but hardly go. Any necessary recurring payments such as utility bill payments can be made online through maybank2u or cimbclicks! So you don’t need credit cards for this purpose at all!

ESTABLISH AN EMERGENCY FUNDS

For some, this is counter-intuitive I.E. WHY SAVE BEFORE WE COULD ACTUALLY PAY OUR DEBT? The answer is simple! Because if you don’t save first, you’re not going to be able to cope with unexpected expenses. Since we have cut up all of our credit cards, you need emergency funds! So, how much should you save really? Ideally, you’d save $1,000 to start. This money is for emergencies only. It is not for shoes. It is not for a Playstation 3. It is to be used when your car dies, or when you break your arm in a touch football game. Keep this money liquid, but not immediately accessible. Say e.g. put it in an Amanah Saham Bumiputra (ASB) or a fixed deposit account (which can be done online). Don’t link it to your ATM card! When emergency arises, you can easily withdraw it at the counter.

PAY OFF YOUR DEBT

Do a balance transfer to credit company that charges you low interest rates. Don’t pay minimum balance only. Start changing your lifestyle so that you have more money to pay off your debt. Defer any fancy holidays. Cook at home instead of going out eating.

CURB YOUR SPENDING

While you work to spend less, do what you can to increase your income. If possible, SELL some of the stuff you bought when you got into debt. Get an extra job. May be you would like to consider reading how to become as successful as Adam Khoo who became a millionaire at 26.