Extract Yourself from Credit Card Debt in the New Year

OK, everybody, it’s New Years Eve and 2008 is only a couple of hours away. Have you thought about what you’re going to do to improve yourself for the New Year? If you’re in a significant amount of credit card debt, one of your top New Year’s resolutions should certainly be to get your finances in order and implement a plan to extract yourself from this debt in the upcoming year.

As with any New Year’s resolution, the best thing you can do is to set reachable short term goals that will help you get to your larger goal of getting out of debt. In addition, you will need to live your life following three basic rules:

1) Aggressively pay down your revolving debt.
2) Live below your means.
3) Save and invest.

If you are finding that you don’t have enough income to comfortably get those debts paid down, you might want to seriously look into the possibility of an additional part-time job. As horrifying as that might sound, it might be the ONLY answer to help you get back on track. Sitting back and letting those finance charges pile up might just be a sure-fire path toward potential bankruptcy. If you increase your income, even for a little bit, you can cut out a substantial chunk of that debt and start to carve out a path to recovery.

Remember, even paying just slightly more than the minimum payment can have quite an impact. Consider this information provided by the National Foundation for Credit Counseling (NFCC). If you have $1,000 in debt and you don’t add anything more to it, it will take you 17 years to pay it off if you have an interest rate of 17% and the monthly payment is $15. If you add just $20 per month to that payment, you will pay it off in 7 years. Even better, you’ll forgo having to pay $1,332 in additional interest.

You’re also going to need to take a serious look at your credit cards, the amount of money you owe to each of them, and the interest rate on each card. In general, you should focus your repayment efforts on those cards with the highest interest rates first.

The best thing you can do for the New Year is to learn from the financial mistakes you made in 2007 and avoid repeating them. If you had a tendency to spend beyond your means in 2007, make it a point to pay closer attention to your expenses this year. Grab that credit card statement and add up those “discretionary” purchases (those purchases that might not have been necessary), such as fast-food restaurants, convenience stores and coffee shops.

Cutting back on those lattes and Red Bulls can go a long way.

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This entry was posted on Monday, December 31st, 2007 at 9:40 pm and is filed under Debt & Consolidation. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.