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>>