The Right Step…
According to Consolidated Credit, the average household in 2017 owes an average of $15,799 in credit card debt alone 1. Repeating offenders are blind to their growing list of credit card transactions. This overspending has nothing to do with necessity most of the time. They want to live a certain lifestyle that is detached from their own economic reality. Overspending on credit cards has no immediate consequence. Problems only arise when the credit limit draws close. Try to follow the outline below to effectively overcome credit card addiction and take a step in the right direction.
The most common problems associated with consumer debt I see are economical, emotional, social, and mental burdens. Debtors in denial do not keep a precise budget and very rarely do they know how large credit card debt can impact their life. In addition, it is not easy learning to overcome credit card addiction because every time the card is used it creates a positive feedback loop.
Consumer credit card debt is the worst debt you can have. The interest rate of repaying back credit cards hovers above 15% APR easily. Needless to say, the high interest rate is one main reason people with credit card debt stay in debt. It is hard to dig yourself out when you pay back $300 every month but the overall debt balance somehow only goes down by $50. The minimum balance of your payment may seem doable but it is one of the many tactics credit card companies use to keep you paying for longer. This “longer” almost always create a bigger money problems down the road. For example, if you are looking to buy a home or automobile then your credit score is pulled and the interest rate that you fetch will correlate to what interest rate you procured for said home or automobile. The domino effect of credit card debt can keep you paying extras for 30 years!
No one likes to be in debt. Emotions and money are a lot more entangled than most people think. On an extreme level ‘Debt-Anger syndrome’ has become an actual modern medical reality 2. The wear down is powerful because it is so pervasive 3. It contaminates even the small enjoyable things because money is always a pervasive topic. The debt can actually make you feel so stressed that breathing problems may materialize from debt anxiety. You don’t need the doctor to tell you that is no way to live a life.
The next natural emotional stage besides anger for those in debt is denial. Denial and anger are not emotions very far removed from each other. The consumer debt problem is worst because the nature of it is a very personal one. This is the kind of debt a borrower feels embarrassed to admit because thinking back on it…they can’t seem to recall what exact purchases got them here. Socially, debt can stunt relationships and make the debtor feel isolated and alone.
I can truthfully attest that I do find myself in a bout of sadness when I speak to those in my personal social circle who are in denial. Most often, the consumer debt load ends up being in the 5 figures before the bell goes off. I cannot encroach my philosophy of money on them. This is a topic of personal finance. I’m a reliable source of aid when they are ready to change but any unwarranted advice from me can push debtors into further denial.
Lifestyle expectation and public appearances are a common mindset for those that tend to overspend. They have a mental schema of their life and what they consider a necessity. A Starbucks coffee every morning to make the day go quicker. A tuna ceviche appetizer to compliment a great date night out. Another limited edition makeup palette release at MAC to show off with the girls. It all adds up to an ugly balance sheet at the end of the month.
What Needs To Be Done
Make a Budget & Get addicted to it
Get into the habit of budgeting at least biweekly. Obviously you have heard about budgeting a thousand times. That is because it is the best solution if you truly want financial freedom. Take it to heart: the only caveat for a budget is you need to make sure you track every single dollar you spend down to the exact amount on your budget sheet. There is no room for error or “this barely counts so I won’t put it in.” Set an alarm. Do not slip up and think you can put it off until next weekend, or the weekend after that. Budgeting is critical to financial freedom. Budgeting on time keeps you on track.
My husband and I have no personal debt and we save almost $150,000 every year – made possible because we have a budget. We update our budget biweekly either Saturday or Sunday afternoons. You need to do the same, all the time. There is no point to a budget if you do it a few times and then forget about it. You will be back to the old false positive feedback loop in no time.
Side Hustle like Crazy
The more a person works the less tempted they feel to overspend. The idle hand is a dangerous one. Make sure to keep yourself busy for the duration of your debt payback plan. Look online for different gigs that can help you conquer idleness. Sell your possessions on Craig’s List or eBay. Find gigs on Fiverr or Rover. $5 for this or $20 for that might not seem like much but math-money-magic adds up. At the end of the day you will be surprised how much you made and how little you will miss those possession you sold.
Transfer Owed Balances to a Lower-Interest Credit Card
We have all seen those “0% APR** for the first six month***” credit card offers. Transferring your credit card balance to a lower interest card works if you can pay back the owed balance before the promotional interest rate ends. Always read the fine print because after the promotional offer ends, these “low-interest rate” credit cards can jump higher than the interest rate on the card you have now. More on this topic covered by Misguided Millennial.
Pay more than the minimum balance required
When you start saving more money (hopefully because you are keeping a good up-to-date budget) pay off your credit card debts as much as you can. If you are feeling the crunch of the budget then you are on the right track. No pain, no gain. Also, no, I do not believe in a “treat” right after the debt (or part of) the debt has been pay off. This “treat yourself” mentality might start another positive feedback loop and you will find yourself back in the same predicament.
Try to think of credit card debt as the horror movie that never ends. “It” isn’t the killer clown from Stephen King’s novel. “It” isn’t the ugly swamp monster that crawls out on the screen on low-budget movie Tuesdays on Channel 4. This “It” is much, much more terrifying because unlike a movie or book that eventually ends whereas “It” does not end. “It” can haunt you forever and beyond the grave…with a compounded 18% APR. “It” is credit card addiction. No sir and or ma’am, “It” is no day at the beach 4.
Have you dealt with credit card addiction? What is your favorite way to limit spending?