How to pay off your credit cards

13 Apr

Recently I’ve been asked how I got my family out of debt. After losing our business and home in the financial crisis we were left with personal debt from credit cards to the tune of $32,000 from three cards.

After losing our business and home our funds were limited. We’d also borrowed money from two family members. We thought everything would be sorted and the loans would be short term. Nothing was ever sorted and we were faced with the humiliation of losing everything and having to start all over again. But we had our health and we were both employable. I got a job straight away and my husband followed suit a few months later after he realised that no amount of fighting with the bank would change anything.

I had to take over the budget. My husband’s new job was very demanding and mine was part time. I’d never been good with money in the past. Even saying that makes me feel stupid. Being good with money isn’t a choice. It isn’t something that can happen these days. We have to be good with money. We have to be smart. We have to know where every cent is spent because every hour we work takes us away from our families, our friends, we make money for companies and it is our money! We are in control.

Credit card debt is a sinister thing. I got my first credit card at nineteen and it had a $300 limit. It’s all I wanted. In the lead up to Christmas they pre-approved me for an increase to $1000 and it would happen unless I contacted them! I let it happen, spent up big on Christmas presents and was in credit card debt from that day on.

Credit card debt isn’t free money but it is invisible to a degree. We spend on credit cards and can push it to one side because our income keeps coming in and it’s up to us how much we put on them.

When my husband and I first started to settle into home life I had three cards and my husband had one big one. We paid off two of mine but we increased the limit on my husband’s card. We had the same level of debt but I just felt better about it because it wasn’t my fault as such.

Debt is easy to amass when you are trying to live a life you simply can’t afford. It adds up when you buy little things here and little things there. Do that most days and you are thousands of dollars in debt.

We moved into an affordable rental home and I sat down with pen ad paper to figure out our budget. Our credit card debt seemed overwhelming. Even paying the minimum only left me with a huge amount of debt. I imagined doing our budget without that debt. It was a dream I was determined to make come true.

We were lucky because everyone knew we’d lost everything so we were allowed to be thrifty for a while. But I still wasn’t quite sure how to go about it. That’s when I found a show on Foxtel called Til Debt Do Us Part. I became obsessed with it. Gail Vaz Oxlade would go into people’s home and work out a budget that would allow them to be debt free in 2-3 years. She never went into a home where she couldn’t work out a debt-free path in this amount of time because she said ‘finance fatigue’ would come into play, people would tire of counting their pennies and start going back to their old ways.

On her website http://www.gailvazoxlade.com/ she had a budget calculator. You could do your entire budget or just your debt. I entered my credit card debt, the interest rates on them and she showed me how much to pay, on which ones and how long it would take to be debt free. It was such a huge relief to see the path. Logically I knew I just had to put money on them but I’d end up putting too much on and then leaving myself short and having to use them again, and then felling upset that I used them and buying myself a pick-me-up. Sound familiar.

So I entered it all, printed it off, sat down with my pen and paper and constructed a weekly budget for my family. I did it weekly because that’s how my husband was paid. Do it to suit whatever pay cycle you are on. Factor in an allowance for each of you so it’s not to depressing, figure out groceries, all your bills. Ring every single provider and beg for a better deal or a reduction, including your credit card companies. Don’t bother consolidating your credit cards. Statistically most people who do this end up back in credit card debt. You have to do the work and feel the pain to solve your credit card problem forever.

There’s so much more to tell you and feel free to ask me questions. The day I made the final payment was one of the best days of my life. I rang my husband immediately. We were debt free. It was better than winning lotto, almost.

La Dolce Vita – Jo Abi

2 Responses to “How to pay off your credit cards”

  1. mummamayhem April 13, 2012 at 10:31 am #

    Thanks for this!My husband and I are in a similar situation, it’s nice to read that someone has come out the other side!

    Like

  2. Jo April 14, 2012 at 1:22 pm #

    Check out Gail’s site. So many inspiring stories. I’d do my budget and read all the inspiring stories. There’s nothing like being debt-free, mortgage aside. It’s the only real power any of us have.

    Like

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