First Step to Financial Freedom: Become Debt-Free

Are you tired of worrying about the money you owe? Here are four steps to becoming debt-free!

Step 1: Stop adding to credit card debt. If you can’t stop using them, cut them up! Or, leave your credit cards at home when you shop; carry only cash. If you place yourself on a weekly allowance, you will become much more aware of the money you do spend.

If you have to use plastic, consider a debit card rather than a credit card. And, use only 2-4 credit cards rather than a wallet-full. Keep only those cards that you’ve had a long time and on which you have a positive credit history (because you’ve paid them on time). A few good accounts can boost your credit score. Too many cards with too much debt will lower your score.

Step 2: Look at those cards. Reduce your interest rate by asking for a better rate. If you can transfer the balance of a card with a higher rate to one with a lower interest rate, do so! Then pay on time. If you receive a card with a low introductory rate, do not accept it unless you can keep that rate for at least one year. Read the fine print: do not activate a card with hidden fees or costs.

Step 3: Reduce those balances. List each card, its existing balance, minimum payment required, and the interest rate. Pay down the card with the highest interest rate FIRST. If you have to pay the minimum on the other cards to pay off the high-rate card, do so. As soon as the highest interest rate card is paid off, use the same amount to pay down the card with the next highest interest rate and so on until you have paid off ALL the cards.

Keep one low-interest card for emergencies and maintain a zero monthly balance on it by paying it in full when the bill arrives.

Step 4: Once you are debt-free, think about investing the money you’ve been using to retire your debt. If you chose to live on less while getting rid of debt, you can continue to do so while building an investment account.

If you think this can’t be done, think again! Visualize how you will feel being debt-free, paying cash for every purchase, and looking forward to a retirement without worrying about creditors.

One last suggestion: to stop the flood of credit card offers that hit your mailbox, call 1-888-5-OPTOUT (or 1-888-567-8688).