Do you own a credit card – or rather several credit cards? Do you use it regularly, even for small purchases? Do you pay just the minimum each month? Do you know exactly how much you owe and at what interest rate? If you’ve answered ‘yes’ to the first three questions and ‘no’ to the final question, then you definitely need to start going over those statements. Chances are, your bills are piling up and you’ll soon be in real trouble.

Most people opt for credit cards instead of cash because it is more convenient. But users should be responsible; otherwise these can become a big liability.

Take steps to reduce your debt now and to eventually eliminate it before it gets out of control. These 6 Smart Ways can help you get started:

1) Everything should be in black and white.

Record the total amount of your debt – including the interest and minimum payment each month. This will give you a more realistic view of how much you really owe. But paying just the minimum will get you nowhere. So you should aim to pay for more than that if you want a good head start.

Create a budget wherein debt payments are allotted a bigger chunk of your income. Is your debt bigger than your income? Then you may need to make sacrifices. Cut back on non-essential expenditures such as vacations or that new electronic gadget you’ve been eyeing for a while.

2) Pay with Cash as much as possible.

While you work on paying your current debt, the next sensible move is to stop using your credit card. This will help you focus on your goal without getting distracted by new card bills.

Always pay cash for your purchases leaving your credit card to take care of emergency payments. Also, using cash will give you a deeper appreciation for the value of your hard-earned money.

3) Talk to your Creditors.

When creditors come calling at your door, do not avoid them. Be forthcoming about your money problems. Let them know you intend to pay your debts but at a slower pace than originally agreed upon.

Lenders will want to help you and will usually suggest a new payment scheme to your benefit.

4) Live within your means.

Do not attempt to live a lifestyle you cannot afford. Take stock of what you really need and what are luxuries. Cut back on the latter and use the money you save to pay off your debt. And do not buy on impulse. Always think twice before spending. Do you really need it? Is it essential to your day to day living? If it’s not, then the only sensible thing you can do it to hold back.

Treat everything you buy as an investment. Self-control is the most reasonable yet hardest thing to exercise. But if you make it a habit, you’ll find that it gets easier to do every time.

5) Switch to a low-interest credit card.

If you must have a credit card, then choose one that offers a lower interest rate. Some card companies let you pay an annual fee in return for cutting your interest rate to almost half. Keep an eye for such offers.

Keep track of your future transactions. Keep well below your credit limit. As much as possible, pay your bills in full and on time. Not only will you avoid trouble but will also improve your credit standing with the card-issuing bank.

6) Start filling up that Savings Account.

Your savings is not a one-time bank deposit. Rather, it’s done regularly over a long period of time and usually in small amounts. Make sure you have enough in the bank to cover for sudden expenses. This means you won’t need to take out a loan when that rainy day comes.

Being financially independent is not only about having lots of money. It is also about being debt-free. It takes a lot of willpower coupled with action to reduce your debts. It’s easy to lose faith when you find that you are having a hard time. Discipline yourself. Stick with what you’ve started. Pretty soon, you’ll find yourself on the road to better financial health and you’ll never want to be in that sticky situation ever again.


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