{Financial Goals} Tackle Your Credit Card Debt Today

Slow-and-steady-moneyHave you ever heard the phrase, “a goal without a plan is just a wish”? Well I’m starting to think that is true. Like many of you, I always have financial goals… some I have shared on this blog and others I have not. As we start this brand new year, I have to ask myself, were my goals of last year actual goals or just wishes for the future? I started reflecting on this the other day while looking at older posts about financial goals. Sure, I can list some of my goals but without a plan, how can I help you as readers follow my financial journey? Isn’t that the point of all of this? I also started wondering how much is too much to share? The answers to these questions will unfold throughout 2013, but for today, getting a plan together is the priority.

The Problem: In my pre-She Makes Cents life, I worked every month and in a short amount of time, I paid off my credit card. Then the bottom fell out and I was using my credit card to simply…live (very honest moment). Long story short, my balance of about $5300 (rounding up) is nowhere near, where it should be. Why, you may ask? Because I was caught up. I started swiping to get the “cash back” deals that I told myself I would pay it off at the end of the month and didn’t. I wasn’t using my envelopes as I should have and I might not have fully realized the my new financial situation.

The Solution: In reading some of my older posts, I remembered a period where I locked my credit card up in a safe deposit box.  Initially, I just wanted to see how long I could go without credit card spending.   I wasn’t swiping, I wasn’t living beyond my means, and the balance was slowly decreasing over time. I am a very goal oriented person, so I know adding the component of an end goal date, one of the tips featured in the post How to Make and Achieve Your Goals, will help.  Thinking back, why did I ever take the card back out?

The Plan: If you are in a similar situation, this is how I plan on making this wish into a goal and a goal into a “been there done that”. While I would like to have this paid off in a year, I know I may need cushion. My end goal date for credit card payoff is August of 2014. That means, with my interest rate, I will need to be making a payment of $294.36 per month to be credit card free by next August (check out the credit card payoff calculator at the bottom of my sidebar to figure out yours).  Instead of paying the minimum, which is NEVER a good look, I will pay the fixed rate listed above or more.  Also, whenever there are cash back deals through my bank, I will use the “rewards” to pay down my credit card. In my research, I have heard the advice to pick up the phone and call your credit card company for a reduced interest rate but depending the company, they may label you as a “high risk” customer and close your account, so do your research first. 

How Are Your Eliminating Your Credit Card Debt?

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The Envelope System Saves $$$

Someone pinned this picture on Pinterest of them dividing their money into different envelops as suggested by financial expert, Dave Ramsey. His explanation of the envelope system was simple and made cents/sense, so I thought I’d share it. My thoughts are in PINK, of course. I hope you enjoy!

~Danielle

 

 

 

 

 

 

 

 

 

 

 

Get on a Simple System

The key component to Dave Ramsey’s, “Total Money Makeover” is the envelope system. What is the envelope system, you ask? Well, according to Ramsey, its “way to handle money still works. People used to always use cash envelopes and even Quicken to control their monthly spending, but very few do in today’s card swiping culture”. I will say that it works and the comments to post prove it. Check out Ramsey’s simple basics for starting a cash envelope system.

  1. Budget each paycheck. Budget is a dirty word to most people, but you must budget down to the last dime if you’re going to successfully implement the envelope system. While I know plenty of people who budget a certain percentage of each check, I budget specific figures.
  2. Divide and conquer. Of course, there will be budget items that you cannot include in your envelope system, like bills paid by check or automatic withdraw. However, you can create categories like food, gas, clothing, and entertainment. I usually work off three main categories: groceries, restaurants/entertainment, personal maintenance (hair, nails, or anything that will help me feel “pretty”). I chose these categories for myself because these are the areas I could be tempted to overspend. I pay my bills off the top and then I budget each paycheck into these categories, which were listed in order of importance.
  3. Fill ‘er Up. After you’ve categorized your cash expenses, fill each envelope with the money allotted for it in your budget. For example, if you allow $100 for clothing, put $100 in cash in your clothing envelope for the month.

From Ramsey

When it’s gone, it’s gone. Once you’ve spent all the money in a given envelope, you’re done spending for that category. If you go on a shopping spree and spend the $100 in your clothing envelope, you can’t spend any more on clothes until you budget for that category again. That means no visits to the ATM to withdraw more money!

Don’t be tempted. While debit cards can’t get you directly into debt, if used carelessly, they can cause you to over-spend. There’s something psychological about spending cash that hurts more than swiping a piece of plastic. If spending cash whenever possible can become a habit, you’ll be less likely to over-spend or buy on impulse.

Give it time. It will take a few months to perfect your envelope system. Don’t give up after a month or two if it’s not clicking. You’ll get the hang of it and see how beneficial the envelope system is as you dump debt, build wealth, and achieve financial peace! See … simple! Truth… I sort of fell of the wagon for a while. I actually, couldn’t remember what purse I put the envelopes in until today, when I found them, and I had $20 in my restaurant fund. I started back on the system TODAY!!! It takes work but most great things do….

photo credit: Tales From the Coop Keeper | content: David Ramsey

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What are your categories for your envelopes?

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