How To Reduce Debt

The Good News and the Bad News: The dishwasher breaks; your car needs new brakes; the roof springs a leak; you’re laid off from work: our basic needs sometimes exceed our income, which means we spend money, not in our budget. The good news: credit cards can be lifesavers in these situations.

The bad news: a $3000 balance will take 39 years to pay back at an interest rate of 19.8% a year and you pay only the minimum balance each month. This means your original $3000 costs a total $13,000 including the interest! This is why credit card companies market their services so aggressively. The credit equals profit: for them. For emergencies, use your credit card but don’t charge items you can live without if you carry a balance from month to month.

First Strategy: Get Interest Rates reduced! Transfer balances from high-interest cards to low-interest cards if you can. If you carry a balance and your interest rate is higher than 7% call customer service and ask to speak to a supervisor. This person will ask: “Why you want to speak to a supervisor?” You say: “Because I want an interest rate reduction.” If they can; they will offer you a decrease immediately rather than bother their supervisor. If they refuse, don’t give up: ask to be to transferred to a supervisor. Persist. One client took only 2.5 minutes to decrease his interest, on three cards, a total of 15 points, another client called once a week for six weeks before getting a reduction.

If you have maxed out your cards because of an emergency, tell customer service what happened. They are human. You may get a more positive response [Don’t be tempted to make up a story; they hear many tales of woe and it’s easy to detect ones that are not true].

If you have maxed out your cards because you are an impulsive spender: cut up your cards. Get counselling before it gets worse.

Second Strategy: Pay down High-Interest Rates First. Got more than one credit card debt? I know clients who pay their credit card bills with equal dollar amounts on each card each month. That does not make financial sense.

Write down your balance and interest rate for each card. Pay the minimum on every bill except for the bill with the highest interest rate. Pay as much as you can afford on this bill so you pay it down. When this one is paid off, start paying down the card with the next highest interest rate.

Remember to Persist: Once you have paid a bill down from maximum, call again for a reduction in interest even if they refused you a couple of months earlier. Also check if you can increase your credit on a lower rate card so you can then transfer debt from a higher interest rate card. If you don’t understand this, go to your bank and ask the customer service person to explain it to you.

Five Easy Ways Enjoy Yourself and Save Money: Invite friends to your home instead of meeting in a restaurant. When they ask: “What can I bring?” say “How about an appetizer or dessert.” Make a tasty, inexpensive main course like spaghetti with sauce and a salad: they bring the rest and everyone saves. Resist buying manufactured, packaged foods – manufacturing and packaging increase costs – plus most junk foods and candies are expensive and have little or no nutritional value. Reduce the amount you spend on cigarettes, alcohol [or recreational drugs]. You save money, calories and your brain! Reorganize your closets. Find and wear clothes you forgot you had. Resist buying new clothes, makeup, shoes or anything you don’t really need. Rent videos & DVDs instead of paying $8 at the movies. Loan books from the library for free instead of buying paperbacks.

Three ways to generate money: Tell your pals your new year’s resolution is to pay off your credit cards and you will be their girl/guy Friday for [say] $20 an hour to help them [clean out their closets, garage, garden, attic]. My pal was laid off when I moved house, I still remember her Girl Friday help: it was worth every penny. Have a garage sale – invite your neighbours to have one on the same day and you will attract more traffic to your street. Take paperbacks to the office and sell them – sell children’s videos they no longer watch or toys they’ve outgrown. Tell everyone you are recycling. It’s true. You are recycling for money.