Elaine King, founder of Family & Money Matters and Certified Financial Planner, appeared on Univision’s News Café program to share practical tips on how to reduce credit card debt.
Credit card debt is a significant problem for many Latin Americans. The average American has a balance of over $4,000 on their credit card. If you’re struggling to bring down your balance and sick of paying high-interest fees, get control of your debt by following these 4 steps:
1. Make a List of Your Credit Cards Costs
What credit cards do you have and what interest rates are associated with each one? Figure out the cost of each card on a yearly basis. “For example, if you owe $5,000 on a card with an interest rate of 20%, it is costing you $1,000 in interest every year,” Elaine says.
2. Budget Using Fixed and Variable Costs
Figure out where there’s money in your budget to set aside toward paying off your debt. To do this, make a list of your fixed costs. These costs include things like food, your electricity bill, or rent. As Elaine explains, these are the things that “you have to pay whether you have money or not.”
Then, consider your variable costs. These costs are your “wants” like going out to eat lunch instead of bringing food from home. Reduce your variable costs to save money.
3. Create a SMART Goal
Create a SMART goal, which is Specific, Measurable, Achievable, Realistic and has a Time limit. Sign your goal “Because it’s a commitment to yourself,” Elaine says.
4. Define your Motivation
Think about why you want to pay off your debt and then save. After you pay off your debt, you can continue to save the same amount each month and put it towards a personal financial goal. Do you want to go on vacation? Invest in your business? Add to your retirement fund? These are all great reasons for saving that will keep you motivated to set aside money each month.
With these tips, you can get out of crippling debt and enjoy the freedom of working towards your goals. Watch the video to get all the details on kicking your credit card debt to the curb!
If you’re ready to go beyond eliminating credit card debt and transform your finances for the better, discover the keys in Elaine’s book, La Familia y el Dinero Hecho Fácil.