When you’re drowning in debt and unable to pay off your credit cards, bankruptcy may seem like the only option. As Rowdy Williams points out, “when you can no longer pay your debts, it can become overwhelming. For many, that means filing for bankruptcy.” With bankruptcy showing on your credit report for ten years, you may struggle to find employment, get a loan or even find housing. So, consider the following five strategies to pay off your debt and avoid bankruptcy.
Cut Up Your Cards
The first step to financial freedom is to cut up the credit cards. You’ll never get out of debt if you continue using your credit cards, so go back to cash and debit cards. This way you can only make purchases when you have the necessary cash in your pocket or bank account. Credit cards can be a temptation that you should not have to struggle with while trying to get your debt under control.
Eliminate Unnecessary Expenses
You should also review your fixed and variable personal expenses to identify and eliminate unnecessary costs. According to a survey by CBS News, U.S. homeowners spend nearly $2,000 per year on unnecessary expenses, with the most expensive being professional housekeeping at $285 per month. Whether it’s housekeeping, landscaping or premium TV, canceling nonessential services will allow you to put that money towards your credit cards.
One of the biggest reasons people end up in debt is that they feel like they need to have it all. They need the newest phone, the coolest car, all the latest and greatest. But you really don’t. Stop looking at what your neighbors have and focus on what is going well for you. If you stop trying to compete, you may find that a lot of your money problems will start to get a lot better.
Use the Debt Snowball Strategy
Pioneered by financial expert and motivational speaker Dave Ramsey, the Debt Snowball strategy involves making minimum payments on all your cards except for the one with the smallest balance. For this card, you make the largest possible payment each month. And once you’ve paid it off, you can target the credit card with the next smallest balance.
Talk to Creditors
Don’t give creditors the cold shoulder whey they call. If you’re unable to make a payment on time, explain your situation to the creditor and let him or know when you’ll be able to pay it. Many creditors will waive late fees or even lower your interest rate if you talk to them.
Credit card debt is a significant source of stress for millions of Americans, contributing to anxiety, sleep disorder and a lower quality of life. Following these tips, however, can help you pay off your debt and regain control of your finances.
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