A very few people are aware that not more than 10 percent of their income should go towards meeting credit card payments every month. For example, if you bring home $5,000 every month, you should not spend more than $500 to pay for your credit card dues. Unfortunately, the real picture narrates a completely different story. For those who are almost snowed under gigantic credit card debt size, payment towards meeting dues often exceeds this ‘10’precent slab. They struggle hard to cope with the credit card debt payment and overall management of their financial problems.
What you should do?
If you are in similar situation where credit card debt is too huge a figure, work on a plan to reduce your credit card debt burden without risking your financial assets in order to regain your financial freedom and stabilize your financial condition. When you develop a good strategy to eliminate credit card debt or reduce the same, it will help you avoid bankruptcy filing. Cut back unnecessary expenses so as to pay off credit card debt as early as possible. Don’t cringe at restricting your budget; it is only a makeshift arrangement. Once the debt is paid in full, you can reinstate the previous budget.
To come out as a debt-free man, you need to maximize monthly cash flow. Spend a part of your income for the most essential obligations while free cash should be skewed towards paying off a slice of debt at one go. Clear the high interest debt first and then proceed towards making payment of those with low ceiling of interest. High interest debt adds more interest, thereby inflating the debt size and making it more problematic for the debtors to clear the dues.
If the largest slice of debt happens to be the high interest debt, then it will take a long time to eliminate dues with the free cash available. Such a long span of time may be frustrating for you. In that case, start with paying off smaller debts. Even when a small debt is cleared in full, it frees up additional cash that you can use to actualize your debt reduction planning. Paying off smaller debts first helps you save more funds to reduce the size of a high-interest large debt.
Whichever strategy you adopt, at the end of the day, it just matters if the debts are cleared or not. After elimination of all debts, some people prefer closing some of the credit cards, particularly the store accounts. Doing so may help you avert the debt problems that may arise in near or remote future.
If you are not left with enough of cash – after meeting monthly financial commitments – to pay off your debt or interest is too high to manage, consider other alternative options. Traditional means have some limitations and work fine only when the debt problem is yet to go out of control. However, when the problem is of severe nature, you should contact a non-profit credit management agency for guidance and to find a way out of debt-related issues.