Create A Budget To Pay Off Your Credit Card

Tuesday, April 28th, 2009 at 9:58 pm

A monthly budget will help pay off debt, reduce stress, and increase your credit score.
For most Americans, a credit card is just another part of their financial history. It is rare to find an adult that doesn’t have some sort of debt or credit card. In fact, the average amount of credit card debt for each American is around $9,000. Also, according to CNN.com, overall credit card debt has increased by 315% from 1989 to 2006. While many dream of the days when they are debt free, it could become a reality sooner than most people think.

Focusing on a set goals to accomplish every month, along with being aware of how much is spent, is the first step towards setting up a budget.Set GoalsSet goals for every month and year. Writing down small and big goals are a great way to stay motivated to pay off your credit card and other debts. Once these goals are met, reward yourself with a small treat, such as a movie matinee or a picnic in the park. Some of these goals can include no new charges on your credit card for 6 weeks, paying off all your credit card bills on time, or earning some extra money to help pay down your debt. Larger goals could include paying off one credit card within 12 months or raising your credit score by 20 points. Figure Out Monthly Credit Card PaymentsAfter setting the goals that include the time frame that credit cards need to be paid off, create a monthly payment plan that will pay off the debt. Be sure to take into consideration the monthly interest percentage because that will not be put towards the principle balance.

There are many free calculator tools online that will calculate this monthly payment amount for you by doing an internet search for ‘debt repayment calculator’.Lower Interest RatesIt is possible to additionally lower your credit card
interest rates by simply calling the credit card company and asking. Be sure to do research beforehand and compare other competitor’s rates. This way, when you call the credit card company, say, “Discover is offering an 8% annual interest rate, can you match it?” and if they can’t (even after talking to the supervisor), transfer your balance. Many credit card companies offer a 0% interest rate for balance transfers from other credit cards for a certain amount of time.Track Your ExpensesTrack your entire variable and set expenses every month. Initially, sit down and make a list of your regular bills.

These usually include rent, mortgage loans, car payment, student loan payment, credit card payments, cable/internet, and insurance. Some variable expenses include gas, entertainment, clothing and food. Keep all receipts to calculate a running total of these variable expenses. After two to three months, it should be possible to figure out the average amount spent and to budget accordingly.

Create A BudgetOnce expenses are figured out, begin to create a budget. Under a column of expenses, list all income. This may include salary, child support, or freelance income. If this amount varies monthly, be sure to estimate low and keep track of this just like you would with food and gas receipts. It is so important to make sure that your income exceeds your expenses. Benefits Of A BudgetOnce a steady monthly budget is set-up and credit card debt is beginning to go down, personal financial stress will also lower.

Not having to worry about income versus expenses because it has already been planned out will reduce anxiety and worry about ensuring that bills can be paid every month. Besides reducing stress and anxiety, lowered debt will also increase your credit score, which can help you receive better rates for mortgages, apartment leases, and other items requiring a credit check.