12-Minute Financial Makeover Step 6 - Ease Your Mind with Debt Freedom Plan

This is the 6^th installment of our Financial Makeover Series featuring carefully selected personal finance subjects. We hope talking about these basic principles can allow you to figure out what can help the most in your own unique situation.

We talked about avoiding fees in Part 1 and how using a no-fee online checking account could help you so.

Part 2 featured spending more on things you truly love using a fun budget approach.

We continued in Part 3 with the amazing freedom of budget choices that can allow you to realize more of your projects and dreams.

Part 4 talked about emergency savings and having a personalized contingency plan.

Part 5 suggested to hammer down boring big recurring expenses.

After these, we now feel ready to abort an even more challenging subject. So, let’s put on our armor, sharpen our sword and face on the dreaded debt beast.

 

The Right Mindset

Having too much debt is probably today’s biggest financial problem of too many families. We did not start our Financial Makeover Series here because we believe it’s better to have developed some tools before tackling on dreaded debt.

 

With some confidence in your abilities, getting out of debt can be quite straightforward. You just have to allocate money in the right way to achieve it.

 

We know getting out of debt may seen difficult or even impossible for some. Many are even addicted to debt. They know extensive use of it is bad for them yet became comfortable bathing in it. Sadly, they are so afraid about getting into that battle.

 

But after you get over that steep psychological hurdle, getting rid of debt becomes basic math. You have to believe and decide you can get out of debt. No one can do it for you. You have to commit and do it for yourself and your family. The good news is that you have that power in you.

Pay Off Your Credit Card Balance Every Month

NEVER Carry a Credit Card Balance

Even though some people think it could help your credit rating, according to my view, carrying a credit card balance is NEVER a good idea.

In fact, if you use a credit card, you should adopt this three-part Basic Personal Finance Rule:

Lower Your Credit Card Limit if you’re Not Disciplined Enough

Opt for a Lower Limit

If you’re undisciplined, in addition to eliminating the majority of your credit cards; lower the limit of your remaining credit cards as much as possible.

You will thus avoid temptation more easily.

For Emergencies Only

At worse, only one card with a 500$ limit should be sufficient. 

Eliminate Most Credit Cards If You’re Not Disciplined Enough

Eliminate Your Credit Cards

If you’re undisciplined, simply avoid credit cards. Destroy them to avoid temptation.

You’re the best person to know your strengths and weaknesses. So be honest to yourself and take all means necessary to improve your bad credit situation.

Only One Card For Emergencies

Don’t just destroy your credit cards by cutting them in small pieces; also take time to call all financial institutions implicated to cancel out your credit cards. Remember that you will still have to pay your balance afterwards.

Avoid Paying Annual Fees on Your Credit Cards

Never Pay Fees

You should never pay fees on your credit cards; whether it is interest charge, late fee or even annual fee.

Just use common sense and a little discipline. Credit Card Fees are Simply Useless.

Switch To a No Annual Fee Card

You rarely can take advantage of additional features provided by credit cards with annual fee. Just ask your financial institution to switch to a no annual fee credit card.

The only reason you should pay annual fee is if you can get an immediate monetary advantage than is greater like a cash reward program. But remember that many no annual fee cards can still offer you competitive cash rewards.