[Photo credit: Lendingmemo]
My husband and I are currently in the process of paying off our credit cards (one of my new year resolutions). Getting out of debt is more than just paying things down, it’s changing your routine and breaking bad habits. I thought it would be helpful to share my experience and hopefully inspire some others.
- Create a Budget: My husband and I have been using the budgeting system YNAB (You Need a Budget) for a few years. It a little complex but once you get the hang of it, it’s totally worth it.
- Challenges: YNAB encourages users to combine their checking and savings into one account and use the YNAB system to do checks and balances. The YNAB interface is your source of truth. This helps users stick to their budgets and not overspend.
- Benefits: You can create various categories for your budget, plan for the future, and allocate your money down to the dollar in order to save.
- Develop a Strategy: Start with the card that has the lowest balance, and then proceed to the next. The idea is to create a snowball effect and use the amount that you used on the previous card for the next in line.
- Change Your Mindset and Lifestyle: This one is tough. My old self would come home from work and do a little online shopping, my favorite past time. I kid I kid, but not really. To break a bad habit try to stay busy – work out, cook a good meal, etc. Find new interests and hobbies.
- Unsubscribe from Retail Emails: This tip is not for the faint of heart, but for those who are serious about getting out of debt. I have not made this leap yet – how could I unsubscribe from my favorite retailers (J.Crew and Loft)!
- Create an Emergency Fund: During this time you will also want to save some cash. Pick a dollar amount and put that same amount away every month. Soon you’ll find that you have saved a lot of cash, and who doesn’t want that. This way if an emergency comes up, you don’t have to rely on your credit card and fall back into old habits.
- Give Yourself an Allowance: Nobody said you have to go cold turkey. It’s not easy to stop spending if this is the lifestyle that you have grown accustom to. Allow yourself some spending money to use however you like. Just make sure to stick to the amount you have budgeted. You don’t want to jeopardize all your hard work.
I hope you find these tips helpful. If you have some of your own advice, please share it in the comments.