Credit Card Debt Consolidation: A Solid Step
Maybe it wasn't an easy step to take, but you did it: credit card debt consolidation. Congratulations!
It was a wise decision to consolidate your debt, a terrific step toward getting your financial house in order. That single, lower monthly payment is pretty nice, huh? And now that those credit card bills are off your back, what do you plan to do with the extra money that consolidation has given you?
First, take a moment to think about it: That's not really what credit card debt consolidation has done. Yes, you pay out less in debt now, but you still have debt. And you got into debt somehow. Resist getting yourself back deeper into debt again. To do that, you will have to approach life differently than you did before. You've taken a solid step with credit card debt consolidation. Why not let your next step land on solid ground as well!
New Habits of Financial Health
The only way to break old habits is to identify them, and make small, consistent changes. So, sit down together with your spouse (if you have one). Figure out how your credit card debt ballooned. Was your first purchase an engagement ring that was too expensive? Next, a honeymoon vacation you couldn't afford? A home you couldn't quite afford so you had to put little things - or even necessities - on the cards now and again?
It's important that you answer the question: How did we get here? Or else you will likely find yourself in hot water again - and debt consolidation may no longer be an option. Now is the time to be very honest with yourselves and come clean about patterns in your behavior that got you in debt. And make a conscious effort to change those patterns for the better!
And for those who've had a problem with debt, there's no better place to make a change than by learning how to budget your money.
Budgeting
- Save 10% of every paycheck With you new lower monthly payment, you can do it. Just decide to do it. Right now. With each paycheck, put ten percent of it into a savings account. More if your debt consolidation has provided more breathing room than that. Quickly your savings will grow, and when emergencies strike, or you decide that there is something special you want to buy, you will have the cash to cover it.
- Buy only what you need Most people who get into credit card debt didn't do it using plastic to buy things they needed. Most let their eyes do the shopping and they ended up spending more than they had on things they did not need. Antibiotics for a sick child? That's a need. Aerosmith tickets in the front row? Not a need! And don't make exceptions; that's the surest way to fall back into a bad habit.
- Pay cash Pay with cash, not with credit cards, not even your debit card. Believe it or not, people who pay with cash spend 30% less while shopping than people who use debit or credit. If you head out to do your marketing knowing that you need $200 to cover the things on your list, then that is all you will be able to spend. But if you go thinking you can always pull out the plastic if it comes to more, you will spend more. Instead of planning - yes, planning - to spend more, plan to put back non-essentials if your tally exceeds what you'd planned to spend.
- Buy on discount Look for store brands that meet the quality of national brands, but at a much lower price. Look for sales on the national brands, and especially for in-store promotions. That means looking through the newspaper for the best prices. Be willing to clip and use coupons, as well as to shop at multiple stores to get the best deals. You might also consider joining a wholesale shopping club like Sam's or Costco. By buying bulk, you can experience significant savings. But be careful: you want good deals on things you need, not a great price on something you don't. Leave the king crab legs on special to those who arrived in a Mercedes and get a great price on oatmeal and peanut butter instead.
- Don't eat out (often) Want to know where 50% of the average American's food budget is hidden? In restaurants, fast food places, and gourmet coffee and ice cream shops around the country. Amazing, isn't it. It adds up very fast if you're not paying attention. Five dollars here, fifteen there. And before you know it you've doubled - DOUBLED - what you spend on food each month. Save a little and set it aside for a nice dinner out. Don't be cruel to yourself if you enjoy this kind of thing. But pay attention!
