It might sound strange but it's a good idea to start off your debt reduction program by saving for an emergency fund, before you pay off your debt. Even if you can put aside $500, do it, put it in a separate account where you won't be tempted by it and leave it for unexpected emergencies. If you can get your fund to $1000 fast, do it, but have at least a $500 cushion before you start reducing your debt. You emergency fund will be a god-send if your car breaks down, you need new tyres, the dog gets sick or the children need something important that you didn't budget for. Having that emergency fund will stop you putting those unexpected expenses on your credit card. This is a way of preparing to reduce your debt. You will give yourself the best chance of success if you have that cash tucked away somewhere.
If you have only one credit card, find out what the minimum payment is every month and pay that, plus every extra dollar you have spare. It will be difficult at first but as you see the amount reduce every month, it will give you even more incentive to keep paying it off. You will see the light at the end of the tunnel. Don't be tempted to go back to spending when you reduce your debt. Keep going until you've got that final payment, then celebrate your success with the knowledge that you were strong enough to stand up to the banks, the department stores and your old ways, and you won!
If you have more than one credit card you can snowball your payments. This means you make a list of all your cards with the smallest amount at the top and the highest at the bottom. Make a list of all the minimum amounts and pay those minimum amounts on all the cards except the one at the top. On that one you pay at least the minimum, plus as much money as you can spare that month. Search high and low for a spare five dollars, search pockets and purses, just make sure you pay as much as you possibly can. When you finish paying off that first credit card, you concentrate of the second one on the list. On this credit card you will pay the minimum payment, plus the minimum payment you were paying on the first card and anything extra you can manage that month. This card will be paid off faster than the first card because you're using that extra payment from the first, now retired, card. And you keep on doing that - paying the minimum on all cards , plus as much as possible on the top card, until they're all paid off.
It sounds simple writing it down like that and I know it's not simple, or easy. But if you can do this, if you can dig yourself out from this debt, you'll put yourself in a much better position to live the life you want. Debt strangles you.
I have no doubt that while you're paying off your debt you will get a letter from the bank telling you that as you're such a good customer, they're raising your credit limit and please feel free to use the extra credit facilities they so kindly offer you. (gag) Always remember this: it is not in the bank's interest for you to pay off your debt quickly or completely. When you do that, they stop getting your money. They will tempt you, YOU will tempt you, you say you've been so good you deserve a reward. And yes, you do deserve a reward. But the reward you really deserve is to be debt-free. Never stray from that thought. Having no debt will set you free. I'm not saying you'll never spend money on what you fancy again. But when you get rid of your debt burden you will look at spending in a different light. You will know how difficult it is to pay back and you won't want to go back there again. So, when you get that letter from the bank extending your credit, write back and tell them to decrease your limit. If you used to have $5000, reduce it to $3000, when you pay off more, reduce it again. It will reduce your temptation in this period of debt reduction and as you're such a good customer you'll be given the credit you desire when you finish paying everything off, if you do decide to keep just one credit card.
Another way to save for debt reduction is to have a change jar. It can be anything like a jar or tin or old vase. Leave it in your bedroom and every time you come home, put your loose change into the jar. If you have any spare small notes, put them in too. It will quickly build up if you do it every time you come home. Don't raid the jar! It's not for spending, it's your savings and part of this debt reduction program. Every so often, or when you have to make a credit card payment - or a mortgage payment, take the jar with you to be counted and added to your payments.
If you have a lot of debt it will take a lot of will power to get yourself out of that hole. But it's not impossible. Starting is difficult - making those decisions to change always are, staying on target is difficult too but if you're reading this you're probably at the stage when you're ready to do it. Remember what I wrote about sacrifices yesterday. We all have to make them at some point. So if you're at the beginning of your debt reduction, or half way through it, I wish you the very best and hope you achieve what you set out to do.