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Book I: Taking Charge of Your Finances
If you use credit cards to finance your lifestyle, you're living beyond your
means. It's time to remedy the situation.
Step 2: Cut the cards
Identifying the problem is the first step to digging out of debt. The second
step is often difficult for hard-core credit card junkies: Cut up your credit
cards. Yep, pull out the scissors and start snipping.
Some credit providers can't officially close the account until you've paid in
full, but consider it closed to your usage. Do not, under any circumstances,
use a credit card until your debts are paid in full. If you're deeply in debt, be
aware that this can take several years. But after you're out from under the
burden of excessive debt, the relief you experience more than makes up for
the inconvenience of going without credit for a long stretch of time.
Sometimes you need a credit card of some sort for making airline reserva-
tions, buying items online, or renting a car. If so, get a check card from your
bank. You are essentially paying cash because the money immediately comes
out of your checking account. But this way you can take have a "credit card"
without deepening your credit debt.
Step 3: Set a good budget
and live within it
When planning your budget, be realistic about what you need to spend in
each category, but don't be overly generous with yourself either. You need to
cinch in your money belt if you're serious about repaying your debts so that
you have the money to budget for your debt-repayment plan. Chapter 3 in
this book and Book II's Chapter 1 contain a lot of tips on this process so you
can get in shape to pay off those debts as quickly as possible.
Step 4: Contact your creditors
Communicate directly with your creditors and explain to them that you're
having problems meeting your payments. Tell them about your frugal budget
and ask whether they'd be willing to accept slightly lower payments for a
period of time. Many creditors are more than happy to lower monthly pay-
ments if that prevents a customer from filing bankruptcy -- after all, from
their point of view, a smaller payment is better than no payment at all.
