Reducing credit card debt may seem like an impossible task. Perhaps we have all heard various expressions that relate to the idea that, It’s the little things that make a difference. When it comes to finances, this idea certainly holds true. Much of finance and budgeting for success all boils down to the little things.
If you want to reduce credit card debt, it is vital to consider the little things. So, it’s important for us to step back and evaluate our attitudes and mindsets toward the little things. You see, when we ignore the seemingly insignificant things, we run into problems.
These little things can often have huge and prolonged impacts upon our financial success. As we have touched on many times before, financial success requires discipline. Discipline can often be measured in increments.
Financial Discipline
What exactly is financial discipline? And why is it foundational to your success? Financial discipline is, simply, how well you can conform your savings and spendings to your long-term financial goals. If your goal is to trim your credit card spending then you must have a plan. If your goal is to reduce credit card debt, you most certainly need a plan.
The beauty of working your plan is seeing it reward you over time.
Set your goals; reach your target. Yet, it’s impossible to reach a financial target if you haven’t set one. Author and speaker, Zig Ziglar, once noted, “A goal properly set is halfway reached.” Can you imagine that? Just by setting a goal you can be halfway there to your target.
Ziglar went on to say, “If you aim at nothing, you will hit it every time.” Let that sink in for a moment. It’s a scary and sobering thought. In actuality, the people who fail to aim for a target will do just that. They will fail to hit their target.
Empowering the Possibilities is determined to help you not only set goals, but to hit your financial targets.
When setting your targets, they don’t have to be financial alone. For example, you can set a date as a target. Amy Morin, international bestselling author of leading business magazine, Forbes, suggests that we “create target dates” to end procrastination and reach our objectives.
Credit Card Debt in the U.S.
If you’re someone who is really into the numbers, the American debt-help organization, Debt.org has some interesting figures to consider. Their findings on America’s Consumer Debt shows:
– More than 189 million Americans have credit cards.
– The average credit card holder has at least four cards.
– On average, each household with a credit card carries $8,398 in credit card debt.
– Total U.S. consumer debt is at $13.86 trillion. This figure includes mortgages, auto loans, credit cards and student loans.
Looking at the third bullet point, it might be helpful to see where your credit card debt is in comparison to the average American household. Once you have a better understanding of your own credit card debt, we can look to now strategically reducing it.
Strategies for Reducing Debt
Every goal for success needs a successful plan. To reduce credit card debt, a specific type of plan must be put in place. Not just an idea or wish, but an actionable plan. Let’s call it an action plan, because a plan with no action is mere wishful thinking.
Did you know that there are several different approaches to reducing your credit card debt? We can consider them and see which one might best suit your financial goals. Do any amount of searching on the topic and you will come across at least three proven methods.
All of them are related to snow, interestingly enough. The strategies are, the blizzard method, the snowball method, and the avalanche method.
The Differences of Each Method
It is said that the blizzard method is a strategy that helps you to pay off or reduce credit card debt in the fastest way. Think, rapid movement like a blizzard. The blizzard method requires a few important steps and one must have a good knowledge of his/her credit score.
The snowball method is perhaps the one that gives its users the quickest boost to their internal rewards system. Championed by Dave Ramsey, the snowball method is a debt-reduction strategy where you pay off your debt from the smallest to largest. Then, when you eliminate a balance, you roll that money you were paying into the next smallest balance, and continue.
The avalanche method requires that you sort your cards in order of their interest rates. According to Investopedia.com, the investing and financials website, the avalanche method involves, “making minimum payments on all debt, then using any remaining money to pay off the debt with the highest interest rate.”
As you may have noticed, each strategy has its own individual advantage. Every debt situation is different. You can learn about which strategy may be the best for you by contacting Empowering the Possibilities for specific guidance and insights.
A Practical Example
Let’s look at a real-world example of another debt-reduction strategy that can help lessen your financial stress.
We can call it the balance-plus method, so it’s easy to remember.
Paying off your credit card is an important first step, but you must do so strategically. No one got into debt by accident, and they sure won’t get out of debt without a plan.
Using your minimum payment set by your card issuer, you then want to calculate 1% of your balance owed. Yes, only 1%! Remember we spoke about the little things.
Here’s how it looks:
For example, let’s assume you have a credit card balance of $4,000, with a credit card interest of 24%, and a minimum payment of $125/month. Given these numbers, it will take you 52 months (4 years plus) to pay off your balance. Sixty-two (62%) of your payments were applied to the principal, and 38% applied to your interest.
Now, let’s apply the balance-plus method. Each month you pay the minimum amount ($125) plus 1% of the balance. For the first payment that would be $40. So your first payment would be $165 ($125 + $40). Guess what would happen when using this method.
You will pay off your debt in only 34 months! Further, you will have paid 72% toward your principal and just 28% toward interest. And by the time your card is cleared you will have saved approximately $922!
This method works and the numbers are in your favor.
Get More Control of Your Finances
Did you notice anything about the various strategies? If nothing else, we hope you will note that the little things do make a difference. Finances are no exception. Yet, the smallest of disciplines are more than sufficient to enable you to get control of your finances.
Why not get started today? Set a time deadline for yourself, look closely at the methods discussed here, and get the help necessary to set a goal, create a plan and hit your financial target. You are only one decision away from the journey to financial freedom–and that journey is not one you have to take alone.
You have the power, in this very moment, to make the little things reward you in big ways.
Your financial success depends on it.
