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Do It Yourself Debt Relief
credit card debt solutions | credit card debt relief program
This is the second part of a series on Credit Card Debt Solutions.
For many, do it yourself debt relief is a matter of getting organized and arming yourself with the information you need. The majority of credit card help and credit card relief that you find online is trying to sell you a service that may or may not help in the end but that you will probably have to pay for in one way or another.
Do it yourself debt relief on the other hand is a way to find credit card debt solutions that work for you and that anybody can do.
Understand that I am not talking about debt settlement or negotiation or a paid credit card debt relief program. Those are very different things that we will cover in another part of this series.
We have all at some point bought something with our cards and for some reason have not been able to pay it off at the end of the month. Possibly because you were young and/or uneducated about things like how credit cards work, budgeting and money management or you succumbed to the attraction of buying it now and paying it later…only that you never got to the paying it later part .
Steps to Do It Yourself Debt Relief
I’ve been there…and what I found out was that credit card relief was within my control. I can best summarize do it yourself debt relief in the following steps:
- Develop the determination to get out of debt. I know this is more of a philosophical rather than practical step but it truly is the first step. I figure you might already be here if you are reading this but you really need to be fed up with debt. You need to say to yourself NEVER AGAIN. You need to develop a determination to stop working for the credit card companies and banks.
This is an enabling step that will allow you to stick with the next steps.
- Stop adding to your credit card debt. “If you are in a hole stop digging”. For many, this could mean to stop credit card use completely and move to a cash only mode of operation. If you don’t have the cash in your pocket then don’t buy it. This might be the only way for you to make sure that you are not spending more than you make.
Make sure that you cancel any automatic charges to your credit card – i.e. from Netflix, gym/magazines subscriptions, etc. In fact, you should only use credit if you track every penny and are 100% sure that you can pay it. But after a while this will become such a pain that you will realize you are better off to stop using credit cards period and pay cash.
- Create an emergency fund. “But I am not able to pay my debt how am I going to come up with an emergency fund?” The emergency fund is crucial because if you don’t have one when an emergency or unexpected expense shows up (they will) you once again will need to rely on credit. This is also a way to focus on wealth not debt (more on that crucial difference here).
If you don’t have one you probably want to create a $1,000 emergency fund ASAP (a la Dave Ramsey). Deliver pizzas, sell stuff on eBay, have a garage sale, etc. but do what you need to do to put together $1,000+ for an emergency fund.
Ideally you want your emergency fund to be 3-6 months of living expenses. Therefore you need to set aside money on a monthly basis to achieve this. This money is never to be touched except for emergencies!
- Budget, Budget, Budget.This page on personal budgeting goes into detail on one way to set-up a budget. There are many ways to do this, from the simple to the complex, but the important thing is that you budget so that you decide how you are going to spend your money before you spend it.
A budget will give you freedom instead of restricting it. It gives you freedom because you will have control and you will not have to guess if you have the money to buy something or not.
Getting on a written budget is a major step of do it yourself debt relief. If you ever seek a “professional” credit card debt relief program this is one of the first things they will do, put you on a budget.
- Educate Yourself. Credit card companies prey on ignorance. In order to avoid the common credit card traps you need to understand how they work. Ask yourself, do you understand:
- APR and how interest rate is calculated and to what purchases
- How and why they can raise your interest rate (hint: pretty much whenever they want)
- Balance transfers fees, interest rates, and limits
- Convenience checks and their fees/interest (it’s not the same as regular purchases and they don’t tell you about it!)
- Points, rewards, cash-back offers (to try and seduce you but there’s always a catch)
- Credit limit - how it affects your credit report and why they raise/lower it
and much more…
If you don’t understand how credit cards work you will never have the upper hand or be in control. This will lead you to making costly mistakes.
Do yourself a favor and grab a copy of Suze Orman’s, The Road to Wealth and read the first chapter and then read Dave Ramsey’s, Total Money Makeover. These are two great resources to get you started on your credit card relief education.
Now that you have a high level view of how do it yourself debt relief works the next step is to formulate the specific actions to attack and eliminate those bills. The next part of this series will cover a proven way to do this…
Please check back soon for the follow-up posts on Credit Card Debt Solutions or subscribe to my blog and RSS feed
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