Ask any of my close friends and they’ll tell you my favourite movie of all time is Home Alone 2. Home Alone 1 is a close second.
I’m not going to try and draw a long bow and tell you that this article has anything to do with Home Alone, but every time I see clients with credit card debt, I always cast my mind back to Kevin McCallister maxing out his Dad’s credit card in Home Alone 2.
I guess learning bad financial habits often starts at a young age, for Kevin this was definitely the case. Is this the same for you? Lets get to work on them.
If you struggle with credit card debt, I’m going to give you a few tips on how to get rid of it quickly and debunk a few myths about the so called “plastic-fantastic”. But before I do, you should know that you aren’t alone, and that you CAN pay them off. The average Australian credit card has $4,300 owing on it. Scary stuff.
3 Plastic Surgery Steps
1. Transfer the debt to a Balance Transfer Card
These are cards that are offered by the bank which effectively “freeze” your interest repayments on your credit card debt for a period of 12 months.
2. When it arrives in the post. Cut it Up
You are never going to payback your debt if you continue to keep the card. If you are serious about getting rid of the debt, cut it up and throw it in the bin.
3. Set up a direct debit each pay to get rid of the debt.
Work out how long it will take to repay the debt by making certain repayments of the debt. Give yourself a bit of room because life happens.
Debunking the myths…
Whenever I ask clients why they took a credit card out, I can generally bet my bottom dollar it’s for one of two reasons.
1. The Loyalty Program
Please. Stop it.
There seems to be an avalanche of new must-have credit card deals out there. Offering tens of thousands of points for signing up, travel insurance, the list goes on.
In reality, the research shows that these points are now worth less and less per dollar you spend on the card, and using the points is even more difficult. Then there is the annual fee which often far exceeds any value you get in the points.
2. In case of an emergency….
I’m yet to meet anyone who trusts a bank. If you find yourself in a genuine financial emergency, the last person you want “on your side”, is one of the banks breathing down your necks.
If you want to be prepared for a financial emergency, you need to start building a cash buffer. The buffer should have at least 3 months of living expenses in it. This may also allow you to reduce other costs such as Income Protection premiums.
Of course if you have tried and failed to get out of debts, or you want to find out how to increase what your paying off your debts using your current incomes, please get in touch, or visit www.thewealthmap.com.au – it’s got loads of tips on how to get ahead.
If you haven’t seen Home Alone in a while, do yourself a favour. https://www.youtube.com/watch?v=BOCAtE4PFWY