You made the decision, applied the discipline and you paid off your credit card debt. Now what?
How do you stay free of credit card debt?
Paying off your credit card debt places you in good company
According to a CardHub credit card study, during the first quarter of 2015, Americans repaid nearly $35 billion on their credit cards. That sounds like great news. However, according to the study, consumers ratcheted up their credit card spending in the last quarter of the year, causing 2015 to close out with a $71 billion net increase in credit card debt. In fact, the evidence shows that consumers took on as much new credit card debt in the final quarter of 2015 as they did in all of 2014. Therefore, we can see that simply paying off credit card debt does not mean that you will be credit card debt free.
- Make sure you have a realistic budget and stick to it. Set financial goals for yourself, including retirement, travel, future expenses, such as a home, automobile, or education. Unless it is an emergency, do not undertake any expenses that are not included in your budget or that can be covered by your savings plan. Keep track of your expenses. If you need help with this, there are some good apps that can assist you, such as Goodbudget and Mint.
- Make sure that you have embedded in your budget an emergency reserve, preferably equal to three to four months of your routine expenses, to tide you over should the unexpected occur.
- Assess how you managed to get into credit card debt in the first place. Was it impulse spending? Too much entertainment? Self-medication? The only way to keep your credit card debt away is to first understand your spending patterns and then set out a strategy for recovery. If you find this to be too much to accomplish on your own, turn to a family member, friend or credit counselor. Find other ways to satisfy the same joy that comes from your spending, such as helping someone else buy the things they need. For instance if you just love to shop, but don’t actually need all the stuff you buy, hire yourself out to freelance as a personal assistant. The most important thing is to assess, strategize, write out a plan, and be persistent.
- If you find yourself facing an unexpected expense, such as the car dies, you lose your job or need to relocate, or you require an uncovered medical procedure, consider alternative lending sources rather than relying on your credit cards. Sometimes it is very easy to just whip out the card. It seems painless, until the bills begin to arrive. Pursue instead a short-term, unsecured loan from one of the many popular marketplace lending platforms, such as peer-to-peer. You can obtain just what you need, in easy to repay installments, with low fees and manageable interest rates, through a very speedy, completely online process that will get the funds you need in your hands in time to cover that unexpected expense.