Credit cards are plastic, shiny and seductive, but the idea of debt isn’t new. As long as we have had written alphabets, we’ve had contracts of debt. So why do so many people worldwide stay buried underneath these large monthly sums? Perhaps a small parable to start will help.
Androclyn lived next to a stream. On one side of the stream, nearest his house, there was a tall tree with his favorite fruit. On the other side of the stream there was a shorter tree with the same fruit. It was easy enough to get across the stream with the bridge Androclyn’s grandfather had built.
“Beware of the beast in the cave,” his mother would warn every day. Androclyn was a good and decent chap. He was well liked around the village. His family happened to be lucky because they owned the two trees. He reasoned one day: “Why work so hard for the tree on our side? I’ve never seen the beast. I’ll just eat off of the shorter tree.”
Pretty soon one bite became many and Androclyn had put on quite a few pounds. One day he heard more than his stomach growl. He dismissed it. The sound wasn’t that loud. Then one day as he went to step next to the bridge he heard a twig snap. He turned his head to see that the shorter tree had a large pile of sticks underneath. His weight gave way, and there he was face to face with the beast. His mother cried many tears.
Well, maybe it’s not Grimm’s fairytale, but when we face our credit cards what we mostly face is our habit of using them. If we don’t become aware of that habit by tracking expenditures, then we always see credit cards as safe and useful. Suddenly, like Androclyn, we are trapped. How do we avoid the trap?
Well once we have the trap fixed in our mind it’s time to get out. My grandmother used to say if you want to get out of a hole the first thing you have to do is stop digging. The way to do that is to take each bill and make a chart. In the chart list the balance, interest rates, late fees and dates due. Update this list, monthly.
If you love spreadsheets, go for it! Most of the time, I write this down on a piece of paper. I can pull out and refer to in a pinch. These are some options after you have your chart.
Smallest to Largest: One simple way, after you have resolved to stop using them is to line them up in order of smallest to largest balance. Don’t worry about the interest rates. You pay the minimum on all except the smallest. After you pay the smallest one, you take the amount you were paying per month and add that to the next smallest bill.
Each time you pay one off, you simply tack on the larger and larger amount, making sure to not slip and start using them again. That amount becomes a bigger and bigger hammer to smash down the debt with sooner.
Highest to Lowest: For some people, after they have lined up their bills what scares them the most is interest rates. If you have never looked at the specifics of your bill this can be an eye opener. Rates can be as high as 27-29%. You may want to use the same “bigger hammer” method described above. You just want to reprioritize which bill you start with so that you can get out of debt soon.
There are some suggestions about doing balance transfers, or consolidation loans but without strict resolve to not use credit, many times these strategies put you in a deeper hole when you weaken in your discipline and start adding to the balances of the cards you just got rid of.