The Credit Disaster Mindset
It’s no secret why so many Americans are in debt up to their eyebrows and their credit is a disaster. The moment a teenager reaches his or her eighteenth birthday, credit card companies begin sending offers for credit cards. Some of the offers are extremely tempting. There are promotional rates of 0% for the first six months. Maybe they are offering balance transfer rates designed to help you save money on existing debt.
Many first time credit card users are not fully aware of the problems that are caused by credit card spending. People think, “I can buy now and pay at the end of the month after I get my paycheck!” Of course, as seasoned credit card users have learned, when the end of the month comes, there are other things that must get paid. Your car needs gas. Your phone payment is due. You need to get groceries. It has been a hard month at work and you want to treat your self to something nice. You get the point. Once these other incidentals are paid, you’re lucky if there is enough to pay the minimum payment, let alone the entire balance.
The mindset of so many people is one of “get it now, deal with it later”. When one credit card is reaching it’s limit, this user just goes about getting another credit card or loan. Sure, usually it’s with the intent of transferring your balance to a new account to obtain a better interest rate and have a single monthly payment. The trap is set and you’re walking right into it.
Before long, you’ve got several credit cards, all with balances that you are unable to pay off in a month or two. The interest rates have all skyrocketed because you missed a month’s payment or were late once. Now, when you pay, you are only able to send in the bare minimum.
This is a credit card disaster.
Change Your Mindset
So how does someone get out of the credit card disaster mindset? Once you’ve got several credit cards and not enough income to pay them and your other living expenses, and there are no more creditors crazy enough to give you more money- what then? It’s time to deal with the consequences of irresponsible spending.
If you actually have room on any of your credit cards to spend more, you need to take away the temptation. Cut your credit cards into tiny pieces, and throw them away. Yes, every single one. Don’t save one for “emergencies” because honestly, how many of those credit cards did you originally get in the event of an emergency? How much of the balance on the credit card was actually put there to cover an emergency expense? This is how you break the credit card disaster mindset. Credit cards are not the best way to obtain money in the event of an emergency; especially when you’ve already spent tons of money using them.
You have to make the decision to STOP using credit cards. It doesn’t matter if it’s the holidays, if it’s a time when you are not making as much money, or you just “need” something from the store. If you can’t buy it with cash, then you aren’t going to get it!
Cut Back and Pay Off
You’re probably thinking you don’t have money to buy anything, and, you’re probably right. That’s what credit cards can do to you. What you need to do is create a plan of repayment. Figure out your monthly expenses and your monthly income. Determine where you can cut costs. Maybe you could save gas and carpool to work. Perhaps you can pack a lunch rather than buying one every other day. Maybe you could coffee at home. Could you switch to store brand products? There are ways to reduce your expenses. Find them, and do them religiously. Put the money you are saving into an account. This becomes your “emergency fund”. It will take awhile to grow, but it will grow with time if you continue to cut unnecessary expenses.
Next, concentrate on paying off the bills that you can get rid of first. You should find your smallest balance, and work at sending that account as much money as possible while still making your other payments, in order to pay it off. Once something is paid off, you have that account’s payment to use to pay more money on another account.
It’s going to be a slow and painful process. Getting out of the credit card disaster mindset is not easy- you are reconditioning yourself and teaching yourself responsible spending habits by not using credit cards any more, and paying off your debt. When you do finally have some breathing room, don’t go back to using credit cards. Put purchases off until you have saved enough to buy them with cash. Don’t fall back into the same credit trap you worked so hard to get out of, and before you know it, you’ll find it doesn’t take long to save for a purchase when you aren’t struggling to make monthly payments each month on old debt!