My husband and I want a king size bed. The older we get, the more children we get, the bigger the bed we need. However, we just don’t have the expendable income to get what we want right now. Buying a king size bed means a whole new frame, new bedding and if we can’t find a matching frame even a new set. It’s a pretty big expense. And after talk of financing this large purchase at zero percent for 4 years, we decided the debt wasn’t worth the purchase and we can get a little more cozy in our queen.
And why? Because debt is bad, here’s why.
1. It affects your credit. The more debt you have the more it lowers your score. This really comes into play if you’ve maxed out your credit resources. Low credit scores affect most anything you want to qualify for. Higher interest rates for poorer scores and of course a lesser probability of being approved period.
2. Debt will cost you more. That’s how debtors make their money. They don’t want you to pay off their debt. They want you to keep accruing interest and in turn make them money. So your purchases ends up costing you more.
3. It’s an endless cycle. Once you start accumulating debt, it’s hard to get out of it without a concrete plan. Most people just keep accruing it. It’s hard to stop living above your means because it usually means more self discipline and less of the “I want it now mentality.” That can be hard for a lot of people.
4. No house! My husband ran into this problem when we wanted to buy our first house and we had a lot of debt. We had more than they allowed. We had to pay it down before we could buy. Our debt was actually keeping us from our dreams of owning a home. It was a long hard road and I wish someone would have told us before we got so much debt.
5. It ruins relationships! I heard that money is the number 1 thing that couples fight about. I am sure it’s not because of an abundance, but because there’s not enough or this funds are misappropriated. Less debt will mean less arguments about money.
Not all of us were born Thrifty Divas. Some of you may visit our site regularly, but you’ve just recently started to cut corners and save money with all of our tips we post lately. One of the questions I receive a lot is how to pay off credit cards. Many years ago as a college freshman, I fell into the trap of credit cards. I definitely wasn’t prepared for them nor was I responsible enough to pay them every month.
As a freshmen with a new found freedom and a piece of plastic that could buy me anything immediately, I quickly got into thousands of dollars worth of debt. It was horribly depressing and I spent my senior year of college just trying to clean up my mistakes. I now have a very healthy fear of credit cards and try my hardest not to let other college freshmen fall into the trap that I did.
Some of you may not have gotten into credit card debt the way I did, but you may find yourself in the same situation spending most of your hard earned money on interest, lay fees and penalties. Here are some tips I learned along the way to getting out of credit card debt.
1. Don’t ever get one. Okay, someone is going to say it, so I will state the obvious. If you don’t want credit card debt, try your hardest not to get one. It may be easier said than done for some, but it is the easiest way to stay out of debt.
2. List your credit card debt and make a plan for paying them off. I think the easiest way to do this is to make a list from the most debt to the least. The reasoning behind this is because bigger balances cost more monthly because of interest. If all of your cards carry similar balances, list them by interest rate. Try to pay off the higher interest rates first.
3. Pay more than the minimum. Most credit cards now have a place on the statement where they tell you how much you’ll pay if you pay the minimum and how long it will take you to pay it off. Even if you pick only one card to pay more than the minimum on, you will start paying them off.
4. Ask for a lower interest rate. We covered this a couple of weeks back, but credit card companies want your business. Some will lower your interest rate just because you ask. If they don’t want to, ask that your card be deactivated and that usually changes their minds. Not that you should use scare tactics, be prepared to fully follow through.
5. Avoid debt consolidation. According to financial guru Suze Orman, “Be very careful where you turn to for help with credit card debt. Debt consolidators are often a very bad deal. The National Foundation for Credit Counseling is a smarter choice.”
6. Use your tax refund. I always say you shouldn’t count on your refund for anything. Then when/if you get it, it’s just like extra money. And with extra money, you should pay off debt. It’s that simple, when you’ve prioritized your list of credit cards, so through and pay off what you can. I promise, you will feel as amazing as you would have if you’d have spent the refund on a new flat screen television.
Have you gotten out of credit card debt? What are some tips that helped you?