Dealing with Debt - Credit Card Conundrum

Have you ever made a New Year's resolution? Perhaps one to lose weight? Bet you joined the gym and really went all out for a month or so, until you pulled a muscle or something else came up or even the weather just turned you off. Does this sound in any way familiar? Well just like your New Year's resolution to lose weight I bet you have also made a similar vow to get out of debt and get rid of those credit cards once and for all. Unfortunately just like your weight loss plans, getting out of debt is easier said than done unless you are willing to make some significant changes to your life and lifestyle. To really lose weight you need to ensure that you are burning more calories through exercise than you are taking in. That's really all there is to it - there is no secret formula just that simple fact. Dealing with debt though is somewhat more complex.

Lack of planning is one of the biggest issues impacting people trying to get out of debt, in fact there are studies that show over 65% of people trying to get out of debt never create a plan.

If you are one of these people then you need to really look after this element first as it is one that you absolutely need to ensure is taken care of as without a plan in place you simply will not be able to succeed.

Part of your plan needs to include your budget as that tells the true story of where and how you are spending your money.

Many people think that Bankruptcy is the worst possible option for dealing with debt and in some ways they are right, however simply declaring Bankruptcy will not inhibit your chances of getting credit in the future.  While you will not be able to obtain new credit while you are in a bankruptcy state, this is not a forever thing.  Once you have changed your situation it is possible for you to rebuild your rating again and while this might be a difficult choice to make, in some cases it is the right choice and you really need to look at your personal situation to determine if this is the choice for you.

Your other option for dealing with debt is of course Debt Management, while this doesn't have the same penalties that Bankruptcy does it is a difficult, time consuming and life altering process depending on how much debt you are carrying.

The best way to address it (aside from earning more money of course) is to "target" your debt from the smallest first.  There are other articles that you will read that say you should target the one with the highest interest rate first and there is value in that path too, but by targeting the smallest amount first you can get a real sense of accomplishment as you clean one debt after another.

The thing that you are going to be doing in your debt cleanup is something called "snowballing" basically by paying the minimum amount to all of your other debts and the maximum amount you can afford on your debt with the lowest amount you will get that cleaned up the first.  As soon as you clean that one up, you move your payments of maximum + minimum payment to the next lowest debt and gradually as you clean up one card/loan after another, the amount that you are paying down continues to increase simply accelerating the process.