Dealing with All Those Bills: Planning to Mange Your Cashflow

Dealing with All Those Bills: Planning to Mange Your Cashflow

Debt Anxiety

Do you feel like you’re drowning in debt? Do you dread the mailman dropping off yet another bill? Chances are that some of those bills are for credit cards. If you can get a handle on your credit card debt, you will quickly find yourself much better off. Why? Not only will you save a lot of money in interest charges, but if you ever miss a payment on your card(s), it can go on your credit record as a black mark for seven to ten years. This could hurt your chances of getting credit in the future, such as for a car loan or mortgage.

So, to help out, here we will give you five things that you can do to reduce your credit card debt:

Step 1: Pay more than the minimum and pay on time.
To have even a hope of paying off that card debt, you must make at the very least that bare minimum payment listed on your statement. Just as importantly, pay it on time to avoid a finance charge (which will make next month’s minimum payment even higher).

Step 2: Make a budget.
Schedule your payments and what you will pay each creditor when. Here's an example (not necessarily appropriate for all situations):

Say you owe a total of $1,000: $200 to doctor, $400 to a credit card, and $400 to your accountant. That means 40% of your debt is to the credit card, 40% is to the accountant, and 20% is to the doctor. If you have $100 a month for repaying debt, send the doctor 20% of $100, or $20, put $40 on your credit card, and send $40 to your accountant.

Step 3: Start your own system for credit card debt reduction.
Evaluate your situation and create a structured system for paying your bills. Set deadlines and rules and stick to them! Need help getting organized? There are some great software programs that are easy to use and that can help you with this task, such as Quicken.

Step 4: Wheel and deal, within reason.
If you can negotiate with the credit card companies, you can really help yourself meet that goal of eliminating your credit card debt. Why will they listen? It’s simple: so many people out there have card debt just like you do, and creditors have realized that they need to be flexible. Better to have someone pay a lower interest rate or work out a deal than have them walk away and default completely. Even a few percentage points knocked off your interest rate can save you hundreds of dollars, so summon up your nerve and make that call.

Step 5: Keep your creditors informed.
If you have so many debts that you cannot possibly work on paying them off all at once, take the initiative of writing letters to creditors to explain your situation. Don’t give a big sob story; rather, clearly and concisely explain your situation and give them a realistic date that you will begin repayment. The benefit of this: most creditors will appreciate your openness and will generally treat you more nicely – you won’t be seen as hiding out from them. Don’t abuse this though: honor your commitments and start repayment when you say you will.