Managing and getting out of credit card debt is a topic that’s weighing on many of our minds. The average U.S. household has $6,829 in credit card debt - and that means we are paying $1,141 each year in interest charges.
Most of us aren’t getting the education we need and deserve to set us up for success with credit cards, and that’s a big problem. But even once we know what we want to and should be doing in order to pay them down and stay out of debt, we’re still not making the progress we want.
What I’ve found from my own experience and helping hundreds of people pay down their credit card debt is that we have to understand three secrets in order to make real, lasting progress. Once we understand these three things, we can get started tackling our debt for good.
We have so much working against us.
I got my first credit card when I graduated college and didn’t understand how they worked or all the ways they could get me in trouble. Way too many interest charges and fees later, I struggled to make on-time payments and ended up damaging my credit.
I studied finance in college and worked in finance and still didn’t really understand how credit cards worked or all the ways credit card companies make money.
We have so much working against us when it comes to money because it’s not something most of us learn about, yet we have to deal with it every single day. We also can’t really talk about it - even with our closest friends and family - because it’s still a really taboo subject.
Not to mention, companies prey on our lack of knowledge to separate us with our money. And they’re really, really good at it. Billion dollar marketing budgets tell us that if we just buy this one thing we’ll finally feel like we’re enough - beautiful enough, smart enough, belonging enough.
Women, and even more so women of color, have it worse. Not only do women have more debt than men (one of the many financial gaps they face), women are charged higher interest rates on credit cards and mortgages (even though they default on loans less frequently than men).
All this to say, it’s no wonder we’ve accumulated credit card debt! We have so much working against us. The point of sharing this laundry list of upsetting reasons we’re not flourishing in our financial lives isn’t to upset us (although it should!), it’s to help us muster up some compassion for ourselves for where we are in our financial lives.
It’s time we truly forgive ourselves for whatever mistakes we believe we made. Anyone with our experience and in our situation would have made the same financial choices we made. And only once we truly forgive ourselves and stop punishing ourselves for where we are, are we able to move forward.
SECRET #1: Let go of the shame and guilt surrounding your debt.
Debt, especially credit card debt, can come with so much shame and guilt. Society, including many financial experts, perpetuates that shame by judging our purchases and behaviors. We decide we’re just terrible with money or believe we have no self-control.
Take a step back and consider: what is debt, really?
Debt is just something we bought that we haven’t fully paid for yet. That’s it.
It doesn’t mean we’re bad. Or we will never pay for things. Or that we stole them. Or that we’re a failure. Credit card rates have gotten so absurd and astronomical that it should really be the credit card companies feeling all the shame and guilt.
Debt was a financial tool created to help us pay for things we don’t have enough money to buy yet.
That doesn’t mean we want it. But that’s really all it is.
It’s time we let go of the shame and guilt surrounding our debt.
SECRET #2: Find your motivation to pay down your debt and remind yourself of it often.
For many of us, paying down debt isn’t fun. It can feel like our money is going to a black hole that doesn’t seem to be going away. In many cases, we got the benefits of the things we bought in the past so they feel like they’re limiting our lives in the present.
You may feel angry when you see those hefty interest charges or even swindled if you didn't understand how credit cards worked, like me.
No wonder we don’t want to pay down our debt. And when we don’t want to do something, it makes it really hard to do it.
But when we take a step back, we can see that paying down debt creates more room for our lives in the present: for things we want to have, experience, and save for! Our goals.
Every little bit counts. Every time you pay off a credit card, that monthly payment is now yours to do something else with. If you add up each of your credit cards’ monthly payments and then multiply that by twelve months, that’s how much you could be putting towards other things each year.
Think about what you would do with that amount of money each year. How would that feel?
That’s our motivation. We all lose it time and time again (that’s normal!), but as long as we come back to it, we can get motivated and excited to pay down our debt. It’s a gift to ourselves.
To keep your motivation top of mind, you can carry a picture in your wallet or make an image the background of your phone. We want to remind ourselves of it often.
SECRET #3: Take inventory of your debt
Once we’ve forgiven ourselves, let go of the shame and guilt, and are feeling motivated, we are ready to move forward and do something about our debt.
The first and most important step to tackling our debt is to take inventory. Taking inventory means listing out each piece of debt and helpful accompanying details.
For many of us, this is a daunting step because it feels like it’s less stressful to be in the dark about our debt. We’re afraid of what we might find.
In my experience in my own life and with many people in my community, it’s actually a hugely liberating exercise because it’s most likely not as bad as we think. More importantly, we need to have a clear picture of our situation before we can do anything about it.
You’ll want to gather the current balance, interest rate, payment date, and minimum payment of each credit card.
If this feels too daunting, start by listing out the names of each cards. Don’t be afraid to break things down into small steps. Small steps lead to big results.
Once we forgive ourselves, let go of the shame and guilt around our debt, and find our motivation, we are ready to tackle our debt. The first most important step is taking inventory. You can take inventory and track your progress with our Debt Inventory Tracker.The 30-Day Money Cleanse>>
Blessed with a personal friend who is an amazing, profound writer - Steven Tyler of Aerosmith - I’ll quote a line from one of his hit songs: “Dream on… dream on… dream until your dream comes true.” As we sit here on the edge of a brand new year, it’s the perfect time for us to dream about tomorrow and the future. After all, there’s a future for those who dream about it, plan for it and work toward it.
At seventy years young, Rock n’ Roll Hall of Famer and music industry icon, Steven Tyler, still dreams on. When we first met and started building our friendship, Steven dreamed of launching a solo career in country music concurrent to his work with Aerosmith. He aligned with “Loving Mary,” a Nashville-based band and worked to pursue his dream and had a successful 25-plus city tour and one of his songs, “Love Is Your Name,” rose to the number one song on the Country Music Billboard. Dream on. Dream on.
Many of us are familiar with the Latin phrase, “Carpe Diem,” which means “seize the day." I propose we also consider “Carpe Manana”… seize tomorrow.
“Seize” is the key word. Dreams can come true if one has the courage to pursue them, reach for them, grab them, seize them and capture them. It’s all about pursuit. Dreams alone won’t cut it. Dreams blended with conviction (belief), courage, confidence and passion are the ingredients necessary for a fully-baked plan to rise and prosper. Success is all about the courage of conviction.
Why, one might ask, are dreams so important?
- Without dreams and aspirations, one can quickly move from hopeful to hopeless. Without dreams, you have little to live for.
- Dreams keep you young. They provide motivation to think and act for tomorrow and the future. Dreams bring forth optimism.
- As you mature, you have the benefit and wisdom to selectively choose those realistic dreams that make sense and have personal relevancy.
- Your dreams are exclusively owned by you. You have the pride of ownership, and if your dreams are realized, you also have the power of accomplishment.
- Dreams have no limits. After all, there is only one rule in life, and that one rule is there are no rules! Don’t forget you created your dreams. They operate under your rules.
- There is nothing sweeter than seeing a dream come true. Regardless of how massive or minute, the realization of a dream is absolute bliss.
Successful people dream about their “endgame”… the results they’d like to achieve. Beginning with the end in mind through “creative visualization” can be incredibly beneficial in building your plan to fulfill your dream. Creative visualization is the cognitive process of purposefully generating visual, mental images - with your eyes open or closed - and working to visualize what something will look like at the end of an endeavor.
It’s the golfer who stares at his ball on the green before ever pulling his putter out of the bag, then mentally visualizes softly stroking the ball as it rolls straight into the cup. In his mind, he might also hear the ball drop into the hole, ka-plink. That’s creative visualization.
Creatively visualizing what a dream, hope or aspiration might look like once you complete the activity helps you dive into the process. For instance, if your New Year’s resolution or bucket list objective is to be able to play children’s songs for your children (or grandchildren) on the piano, closing your eyes and creatively visualizing the children joyfully sitting around the piano wide-eyed and excited as you showcase your “new” (or “renewed”) skills to their delight mentally moves the activity from a dream closer to reality. Once you visualize something and emotionally feel what the endeavor would be like at successful conclusion, it provides motivation that will likely lead you to focus, work and ultimately achievement.
Over the years, when thinking about another new year, I moved my messaging and wishes to family, friends and business associates from “Happy New Year” to a more robust “Happy YOU Year!” In short, my wishes and hopes for those I care about is to encourage them to make the “New” Year truly a “You” Year - filled with hopes, aspirations, wishes, objectives, plans, dreams, dreams, and more dreams all in place to lead you (and yours) to a more fulfilling place and a brighter future.
In the classic Broadway musical, South Pacific, there was a line from a song in the show worthy of repeating: “If you don’t have a dream, how you gonna make a dream come true?”
Dream on. Dream on. Happy YOU Year!
-Ira Blumenthal, author of Your Best is Next
For more on pushing forward towards new goals, check out Your Best is Next>>
As a VERB, “resolve” is defined as “…firm determination to do something and committing to a course of action.” Example? “This new year, I resolve to train for and run in a marathon.”
As a NOUN, “resolve” is defined as “…consistently displaying the characteristic of determination, commitment and focus on forward thinking and forward action.” Example? “When it comes to an unwavering focus on exceeding customer expectations, she has great resolve.”
My first entry in this blog begins with “resolve” appropriately and importantly. After all, regardless of what our plans are and how we believe they will be accomplished, we need to start with defining a specific, realistic and important objective. Using words, lines and thoughts from my Simple Truths’s book, Your Best is Next, establishing a goal and even building a plan comes after the commitment. Let us not forget that “commitment” is an act, not a word.
Legendary, iconic women’s basketball Hall of Fame coach, Pat Summitt (“Coach of the Century” per the NCAA) told a story about how her son, Tyler, was cut while trying out for his school’s eighth grade basketball team. Tyler came home after learning he didn’t make the squad and told his mother, with tears in his eyes, “I didn’t make the basketball team… I was cut.”
Coach Summitt looked at her sad son who stood before her with basketballs under each of his arms and said to him, “Tyler, I promise you that if you start working today and wear out both of those balls practicing hard, you will make the team next year.”
Tyler responded, holding back his tears, “Mom, will you help me?” Pat Summitt then replied to Tyler with incredibly profound words we all should remember especially as it relates to “resolve.” She said, “Tyler, of course I will help you… but I will not start your engine!”
Commitment is the first step in starting our very own engine.
Commitment is an act, not a word. The keys to building a commitment to try new things, to do new things and to accomplish new challenges are:
- having a crystal-clear purpose
- making uncompromising sacrifices
- adopting an unwavering determination
However, and it’s a big “however,” you first must commit to starting your own engine.
Not starting your engine and avoiding making a commitment to your “next” endeavor is clearly an obstacle to growth. Although we all need to be flexible in our approaches to fulfilling various commitments and objectives, it’s still an undeniable fact that having no commitment leads you to having no attainment.
Having a crystal-clear purpose is vital. Purpose, in short, is tightly attached to direction. Ask yourselves the following questions to chart your direction:
- How will I define success?
- Why is this important me?
- Does this light my fire and excite me?
- What is my (specific) destination?
- Which way should I be heading?
- What is my contingency plan if course correction is needed?
- How will I know when I reach journey’s end?
People who resolve to committing to a course of action and people who are respected because of their resolve either find a way or create a way to achieve their objectives. They ignore thoughts or enticement for turning back and giving up.
Reverend Theodore Munger wrote, “Nothing in the world can take the place of persistence. Talent will not; nothing is more common than unsuccessful people with talent. Genius will not; unrewarded genius is almost a proverb. Education, alone, will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan ‘press on’ has solved and always will solve the problems of the human race.”
Persistence is vital. It has been said that a river runs through rock not by its power but by its persistence. It’s a continual process.
Passion is also vital. It’s often the driving force that leads to commitment and to successful conclusion. If you want something badly enough and accept that hard work, diligence, focus, persistence and a major personal commitment (time, resources, energy, etc.) is necessary to achieve your goals, you will surely be on the first rung of the ladder climbing to fulfillment.
It takes courage to face the challenges, make the choices and even face the uncertainty that comes with your commitment to a purpose. Action is the key. Remember, commitment is an act, not a word.
-Ira Blumenthal, author of Your Best is Next
For more on pushing forward towards new goals, check out Your Best is Next>>
The holidays will be here before we know it. It’s a magical time of beautiful decorations and lights, gifts, parties... and money stress. Yes, you read that right. Almost half of us stress out about money during the holidays.
It makes complete sense. We take on a lot of extra expenses this time of year. There are expenses that come to mind right away like gifts, vacations, and hosting parties, but there are also expenses that are less obvious. We might purchase a sparkly dress for the office holiday party, take more Ubers than we normally do, or forget that we always give a cash gift to the mail person.
The crazy part is that while we know we’re going to spend more this time of year, very few people plan for it. Even if we set a budget, we’re probably not putting money aside in advance. That means we end up stressing out over how to make these expenses work and most Americans end up with more credit card debt.
Then we’re playing catch up going into the New Year, which makes it even more difficult to succeed in our financial goals.
The good news is, we can plan for our holiday expenses, and the sooner we do, the less pain we’ll feel financially.
Here are 7 easy steps to a financially stress-free holiday season:1. What’s most important to you?
Take a step back and think about what’s most important to you about the holidays. What are your favorite holiday memories? What made those memories special? These are the things you’ll want to prioritize spending money on this holiday season. When you prioritize what’s important and let go of the rest, a magical thing happens. Your lifestyle ends up feeling bigger and more meaningful, yet you end up saving more money.2. Run the numbers
What do you plan to spend money on this year? You can start with the things that are most important (from step #1 above), but there are probably other expenses to plan for. Make a list. For example, you may want to buy gifts, travel, host a party, account for extra dining out, purchase party clothes, or pay for additional transportation.
Get specific and add up the numbers. For example, if you listed gifts above, how many gifts do you plan to buy? What will you plan to spend on each gift? If you decide to buy five gifts and plan to spend $50 per gift, that’s $250 in total spending on gifts. You can make a spending estimate for each item on your list.3. Make it fabulously frugal
Is there any way to reduce the total above while maintaining the quality or making it better? Let’s continue with the gift example. Instead of getting five gifts, you might decide to do a Secret Santa where each person involved gets one person a $50 gift. This adds some excitement to the process. Now you’ve reduced your total spend from $250 to $50 in the gifts category.
Next you want to make the space for your holiday fund. I highly recommend creating a separate savings account for it so that it’s clear that this money is specifically for your holiday fund. I’m a big fan of using an online savings account so you can keep the fund out of sight and out of mind - in its own bucket - while also earning some interest. You can use this method for other larger, less frequent expenses as well.
Then, it’s time to account for your income. How many paychecks do you have from now until you plan to make your holiday purchases? If you don’t get a regular paycheck, break it up by time. How many weeks or months do you have until you plan to make the purchases?
It’s important to account for any expenses you plan to make in advance. For example, you may prefer to buy gifts the month before. That’s when you’ll want to have the money there and waiting for you.
From there, you can calculate it out. If you plan to spend $500 total on the holidays and you have five paychecks until you want to start spending the money, you will want to transfer $100 per paycheck into your holiday fund.
If you’re not sure how to find $100 per paycheck, here are six steps to save $1,000 this month.6. Make it automatic
Set this transfer up to be automatic. Automation ensures that we don’t have to depend on willpower or our memory to transfer the money over each paycheck. This gives us peace of mind because we can feel confident it’s going to happen.
Schedule the calculated per paycheck or per week amount to transfer to your holiday fund automatically. Continuing with our example above, you’d set up an automatic transfer for $100 per paycheck to go to your holiday fund. Then the cash will be there waiting there for you when it’s time to start your holiday spending. You can transfer it over in advance or put expenses on your credit card and pay them off immediately using the funds from your holiday fund.7. Plan ahead for next year.
The earlier we start planning for the holidays, the smaller our transfers can be and the less “pain” we’ll feel per paycheck. When we aren’t playing catch up after the holidays, we can start planning for next year and that will reduce our financial stress even more.
Let’s say you start right after the holidays and have 24 paychecks to put aside $500 for the holidays next year. You’d only have to transfer $21 per paycheck to your holiday fund to have $500 saved in time for next year.In Conclusion
Taking a step back and mapping out a conscious and intentional plan for the holidays allows us to prioritize what’s most important while decreasing our financial stress. If you walk through each of these seven steps, you’ll know exactly how to plan for your holiday expenses this year and get started early for the next.
Then get a head start on your New Year’s goals with our free 48 Hour Personal Finance Financial Makeover.
For more tips on budgeting your money, check out The 30-Day Money Cleanse>>