Too Much Credit Card Debt? Here’s What to Do

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Many of us who have struggled or are struggling with too much credit card debt will have that wake up call: that day when they wake up and realize they’re in over their heads. That day can invoke many feelings of fear, regret, panic and stress, but never fear: you can make a plan to clean up your mess and get out of debt.

How to Get Out From Under Too Much Credit Card Debt

I won’t guarantee that the road to debt freedom will be short or that it come without hiccups, but if you’re seriously committed to becoming debt free, you can get rid of your credit card debt no matter how big the pile is by following the steps listed here. Read them over and then, if you’re truly committed to living a debt-free live, take action.

1. Get Your Head in the Game

This is likely the most difficult part of getting out from under a mountain of debt. When you first look at your situation, it may feel as if it’s too big a mountain to climb. It’s not. Whatever the numbers, you can do this, but you’ve got to get your head in the game first and change your mindset about money and about your ability to dump your debt. Psyche yourself up by reading debt payoff stories and imagining what your life would be like if you didn’t owe anyone a dime.

2. Determine Your “Why”

The reason that people succeed in paying off credit card debt is because their “why” – their reason for wanting debt freedom – is bigger than their temptation to spend money on things that don’t truly matter to them. Most debt problems come from a buildup of impulse purchases on things that don’t truly bring joy to the lives of the spenders. In order to conquer this problem, you have to determine the real reasons why financial freedom is important to you.

Make a list of your “whys” and post it in a place where you’ll see it often, like in your wallet. Make sure those “whys” are in the front of your mind every time you’re tempted to deviate from your journey to debt freedom.

3. Write Down All of Your Debt Numbers

On a spreadsheet, a poster board or with an online tracking system such as Personal Capital, write down the names of all of your creditors. List to whom you owe, how much you owe them, the current minimum payment and the current interest rate you’re paying. Don’t panic when you see the totals: they were there before you decided to face the fact so nothing’s truly changed; it’s just that you’ve made the smart step of choosing to face the music. This is success #1.

4. Write Down All of Your Other Monthly Expenses

Otherwise known as “making a budget“, this step will help you to get a clear picture of what has to go out of your checking account each month. Don’t forget to include a clothing allowance, a medical expenses allowance and allowances for other expenses that you may not have every month but that will eventually come. Check out this post on common budgeting mistakes so that you can learn how to budget correctly for your individual situation.

5. Determine Your Net Cash Flow

Your net cash flow is the amount of money you’re left with each month after you’ve included all net income and subtracted all monthly expenses. This number should be a positive number. If it’s not, it’s time to start selling stuff in order to get your minimum payments to a place where you can afford to make them all with cash. Creating a “challenge everything budget” will help you to know what to cut in order to get your monthly expenses lower.

6. Analyze Your Savings Accounts

Not including retirement accounts, analyze how much you have in savings and investment vehicles. Write the total down, and then set it aside as we work on the next steps.

7. Make a Debt Payoff Plan

At Well Kept Wallet, we prefer Dave Ramsey’s debt snowball. The debt snowball works like this: starting with your smallest debt, put every extra dime toward the debt until it’s paid off. Then take the minimum payment for the debt you just paid off, and add it to the minimum payment on the next biggest debt. You’ll then proceed to put all extra funds toward paying off the next biggest debt, and keep moving up until all debts are paid off. Download the free Debt Snowball Worksheet here.

Another suggestion that Dave Ramsey makes in his Baby Steps is to put $1,000 into a savings account for emergencies, using all extra non-retirement savings funds to put toward debt. If you’re starting out with zero in savings, use all extra monies to create a $1,000 emergency fund before working toward paying off that first debt. This $1,000 will be there in case of bumps in the road such as car repairs.

8. Be Prepared to Handle Bumps in the Road

Every single debt success story we’ve documented has had bumps in the road along the way. Unexpected expenses, job layoffs, car repairs or whatever comes, and it’s easy to get tempted to give up. Now’s not the time to give in – now is the time to get angry at all that your debt has taken from you: your time, your money, your freedom and your joy. Make a commitment that you’ll keep on working on your debt free goal no matter how many times Murphy comes to pull you off course.

9. Beware of Boredom

The journey to debt freedom can get, well, boring. When the numbers are going down and everything is on track it’s easy to get comfy in your improved financial situation, to get bored with the same old, same old and to consider settling for “good enough”. Don’t let that happen to you. If you find yourself getting bored with the mundane task of watching your debts go down, do something wild to give your journey a boost. Sell something big and put the proceeds toward debt, make a list of the vacations you’ll take with cash once your debt free, or scare yourself if you have to into imagining what could happen if you were laid off in your current state of debt.

The point is to keep yourself motivated so that you don’t settle for the “comfortableness” of being able to make your minimum payments. Another way to combat debt payoff boredom is to celebrate your successes. For every debt you pay off or every milestone you reach, be sure to celebrate with a frugal celebration. Make a special dinner at home, buy yourself something fun for under $20 or simply share your success with someone you trust who will be happy for you and your win.

10. Get an Accountability Partner

Choose someone who’s good with money and that you trust that you can share your plan with and have monthly check-ins with to help you monitor your progress. A good accountability partner will be someone that you can bounce spending temptations off of that will be honest with you about what he or she thinks about the purchase but will still let the decision fall on you. An accountability partner can help you stay on track when temptations, fears or boredom set in.

By following the ten steps above, you can and will make progress in eliminating your debt. By sticking to the plan all the way through, you will indeed find yourself living a life free of consumer debt. Imagine how wonderful that feeling will be, and start your journey to debt freedom today.

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5 responses to “Too Much Credit Card Debt? Here’s What to Do”

  1. Brian @DebtDiscipline says:

    Those are great tips. It’s all about having the right mindset and a plan for your money!

  2. LeisureFreak Tommy says:

    What great tips. Motivation is huge and one that should be remembered. After being on a credit elimination quest for some time, the motivation may be forgotten and weaken our resolve. Especially if that motivation was crisis related and the crisis has now been reduced by our efforts. It is easy to fall short of our overall goals. Becoming, and staying, credit card debt free is a worthy goal and the freedom is worth all the effort.

    • Laurie @thefrugalfarmer says:

      You’re exactly right, Tommy. The motivation is huge. Without it, it’s so easy to fall back into old habits.

  3. Steven Millstein says:

    These are excellent and practical ideas. Credit card debt can also really take a toll on your credit score.

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