Finding yourself in a debt spiral of financial problems because you’ve maxed out your credit cards? Don’t worry — there are plenty of ways to make ends meet, even if you feel like you’re drowning in debt. Here’s what you need to keep in mind to dig yourself out of that hole you’re in.
First off: stay calm. Yes, you might feel like it’s the end of the world because you’ve got way too much credit card debt, but you aren’t the first person to get themselves into hot water like this. The truth is that you’re in some good company, and that means there are plenty of resources you can avail yourself of in order to get back on track.
You won’t be able to access any of them if you’re running around like the sky is falling, though, so take a deep breath, count to five, and then get to work on fixing it.
Find a Temporary Solution to Buy Some Time
If you feel like you’ve got debt breathing down your neck, you might need to find a temporary solution to get yourself some elbow room. One good example of this is to apply for a higher credit limit from your credit card company.
Another is to take out temporary loans or raid your emergency fund if you have one, as long as you commit to replenishing it over time. Keep in mind, though, that this is indeed a short-term solution; this is a good first step to get the immediate heat off, but you’re going to have to face the music sooner or later.
Stay Away From Additional Credit Card Debt
If you max out a credit card, you might feel tempted to apply for a new card at a different company. This is not a good idea. If you don’t have your application rejected in the first place because you’re already carrying too much debt, adding a second line of credit is only going to provide yet another avenue for you to accelerate your debt spiral.
There are better solutions out there — solutions that don’t require you to dig yourself even deeper (or destroy your credit score in the process).
Start With the Minimum Payment
Once you’ve gotten your temporary relief, make a commitment to begin paying down your debt little by little. This starts with ensuring you can make the minimum monthly payment on your credit card. Be aware, though, that it should be a long-term goal to pay more than the minimum every month to shorten the amount of time it will take you to clear your debt.
This also will cost you less overall, as you’ll avoid paying interest fees — credit cards traditionally carry pretty high interest rates on borrowed funds, and just making minimum payments prolongs how long you pay those high interest rates.
Budget Your Expenses Better
If you’re struggling to make even those minimum payments every month, it’s time to look at what your other expenses are and see where you can cut costs. While nobody wants to make the sacrifice, you can save money by cutting back on frivolous expenses like eating out at restaurants.
Also, consider cutting back on subscription services like cable television. You can save quite a lot by downgrading or eliminating your cable package and going with a streaming plan instead. If you find yourself having problems keeping track of your spending, consider using a spreadsheet or a mobile app to help you keep track of things.
Find Ways to Increase Your Income
Cutting back on expenses will help, but you can also benefit from having more cash at your disposal in the first place.
You can look into increasing your overall income in any number of ways, such as picking up more overtime, getting a second, part-time job, or holding a garage sale. You can even sell some collectibles on eBay if you think it will help. Every penny counts when you’re trying to pay down your debt!
Build Up a Rainy Day Fund
Once you start cutting back on expenses, increasing your income, and finding ways to make more than your minimum monthly payment, it’s time to start preparing for the future. Bad things happen all the time, and it’s important to be prepared for them. People get fired, cars break down, kids get sick — whatever the occasion, it’s a good idea to have some extra cash put aside just in case.
If you build up (or rebuild) a rainy-day fund to act as a cushion in emergencies, you can avoid having to max out your credit cards right after you finish paying down your debt!
Talk to a Credit Counselor
If you still need some support, turn to your friendly neighborhood credit counselor for more ideas on how you can save money and pay down your credit card debt. Credit counseling services are often available for free and can put you in contact with specialized programs that you wouldn’t otherwise be able to access without a credit counselor calling the shots. In fact, debt relief could be closer than you think!
Keep Calm and Rebuild Your Credit
No matter how deep a hole you think you’ve gotten yourself into, don’t give up. Keep calm and take things one step at a time and you’ll be able to climb back out of that pit of credit card debt, putting yourself back in control of your own finances once more.