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The Credit Cruncher was conceived to help you to keep up to date with credit crunch and recession developments, it provides some helpful credit crunch advice and it addresses personal debt. The Credit Cruncher also seeks to explain how the credit crunch started and shed some light on the worldwide recession. Recently, we have begun to look at how BREXIT will affect the UK economy. Please feel free to leave comments where relevant.

29 Jun 2008

The decline of my credit card debt

I am currently on the verge of defeating credit card debt for the last time - Yes I was stupid enough to get caught a second time with spiraling debt. The first time (more than 15 years ago)I was able to cash in an investment to take care of the bills, this time has been a harder path to walk.
I got to the point where I had decided that some action needed to be taken as, in using the tactic of just hoping that I would be able to reduce the debt obviously wasn't working. The first step is to STOP SPENDING - sounds obvious, but how do we achieve this?
In short, I made a budget looking at all income and outgoings and looked firstly for outgoings that were not required. Insurances that were not really essential, favourite treats that I could do without etc...
Next, I created a graphical representation of my debt - my accounts were already on a spreadsheet, so all I had to do was make a graph - this was to be my inspiration, a way in which I could see the debt coming down month by month.
Next I put all my debt on a '0% interest for transfer' credit card, this meant that everything I paid off my card actually came off the principle, but it only really works when you STOP SPENDING....
Over the next two years any windfall, bonus of monetary gift was primarily earmarked to pay off this debt, and the result can be seen below:

I started off owing more than $13,500 and now owe about $3000. You can see where I used a bonus payment in Dec 06 to rapidly bring down the debt, and again in Jul 07 - As it happens I have enough to pay it off, but that money is currently earning me interest whereas with a 0% interest credit card, the debt shown above costs me nothing.
I would encourage you to have a goal to aim for and a way of representing that goal, MS Excel is great at making spreadsheets and graphs, but the important thing is to be able to recognise your progress and feel encouraged and inspired by it.
The beauty of having paid off your credit card debt is that it frees up the money you were previously spending on debt or repayment, increasing your ability to spend or save as you please - when you have gone through this process I would think you would have to be crazy to abuse a credit card again.

Related posts:
where did it all go wrong?
how to get out of debt
credit card update

1 comment:

Mo Money said...

Well done. You'll feel a great sense of relief when its all paid off.