How to Cut the Credit Card Habit

We've all heard that it's bad to get deep into credit card debt. But stuff happens. The car breaks down. The dentist says we need a root canal. A loved one dies, and we have to get on a plane to head to the funeral. And, of course, more common needs and wants arise.

Sometimes, after an exhausting week of work, you really do feel entitled to that dinner out. And then there are those expenses at school. How many times can you say 'no' to your kids and not feel like a 'heel'? Oh, and yes, then there's Christmas shopping. Confronted with the realities of life and the demands it often places on us, a simple Nancy Reagan "Just say no" won't do. How can we practically stay out of credit card debt - and STILL enjoy life? Here are some specific steps you can take to get control of your credit card situation and hopefully make some sense of it all.

1. Take a Credit Card BREAK

You absolutely NEED to decide that, for a week or two weeks - preferably a month, you are going to FREEZE all nonessential spending. That especially means: No more credit card spending for that period of time. Sometimes, it's too difficult to say: "I'll never use the credit card again." But all of us should have enough self-discipline to say that we will NOT use the credit card for the next week, two weeks, three weeks, or whatever. Give yourself a hiatus from using the credit card. And take that time to contemplate your situation, evaluate your life, and (if you're a person of faith) pray.

2. Reassess your Goals and Life's Direction

While you're taking a credit card break, ask yourself: Where are you going in life? What are your goals? your dreams? your expectations? Do you have goals? Are you just going from one obligation to the next? From one bill to the next? From one "want" to the next? What is the direction and course of your life? What is it that you want out of life?

Where do you want to be in life 20 years from now? 10 years from now? 5 years from now? Everything that you do - from diet and exercise to your spending habits - should be in SUPPORT of the answers to those questions.

3. Plan a Budget

Once you have goals, it's time to plan. Draw up a plan for the achievement of your goals. And then, draw up a plan for your spending. Develop a budget that reflects your priorities and your life's direction. Categorize your spending into the different areas that deal with your life - housing, food, entertainment, education, retirement, etc. Allocate amounts based on what you think you need. Then, add a little cushion based on your strong wants - those things that you really feel you need (a couple cups of coffee each day, that dinner out each week, etc).

Then, do an honest assessment of how much you earn each month. Try to break down by week or every other week, according to how much you are paid. What's the difference between your income and your planned expenses?

What can you do to narrow the gap? It comes down to increasing your income or reducing your expenses. Carefully examine your options, and see what you can do.

4. Reexamine your Creditors

Many people get a credit card without researching their options or reading the fine print of the applications. This is a major mistake. Get all your financial information together. If you haven't yet done so, ORGANIZE your bills and all your related financial paperwork. Get your original credit card applications together - and file them accordingly. If you didn't keep copies, get on the phone with your creditors and get copies of the terms and conditions mailed to you - fine print and all.

Once you've organized and filed everything to where you can make sense of it, go through and determine the credit balance, annual fees, interest rates, and minimum payments for each and every credit card that you have. For this step, pay special attention to the fees and rates. How do they compare with each other?

If it appears that you're being taken advantage of by one or two creditors, it's time to change creditors. If you're not in a position to change, at least make sure you're dealing from a position of KNOWLEDGE. Don't let ignorance be your enemy.

5. Consolidate (if possible)

See if you can consolidate your credit card debt together into one or two bill payments. Keep one credit card open for use. Close the others or at least cut them up and stop using them. You don't want your debt spread out and disjointed. Consolidate it, so you can MANAGE it and eventually pay it down.

Shift your debt to a lender with the best deal in terms of interest rates and annual fees. If possible, try to use a second mortgage - so, you can get some tax benefits.

If your credit is bad, see if you can find a non-profit organization that helps people get out of debt. There are several available. They can help you organize, consolidate, and pay down your debt.

6. Attack Your Debt

If you're on a spending plan and budget, and if you've got your debt managed and consolidated, you're now in a position to pay it down. Take the debt with the highest interest rate and start there. Make MINIMUM payments on all your other debts (hopefully there aren't that many - since you've consolidated) and pay as much as possible on the one you're targeting.

While I'm not telling you to FREEZE debt spending completely, make sure you are at least paying more on this debt than you are accruing new debt.

If you aren't making enough money with your regular job to sufficiently attack your debt, then look for things you can do "on the side" (like write for AssociatedContent) to pay down your debt.

Keep making minimums on your other debts and a maximum payment on your targeted debt until it is paid off. Then, take the money you were paying toward the targeted debt that was paid off - and add that to your minimum payment on the next debt on your list. Keep repeating this process, until you are debt-free.

It's not easy, and it's something that I myself am in the PROCESS of doing. But it's worth the effort. Don't let life overwhelm you. You need to be running your life.