Having a lot of credit card debt in your life can really kill your credit and your ability to buy a home later down the road. Debt-to-income ratio is what the mortgage brokers use to calculate how much home loan you can qualify for, meaning the less debt you have, the better off you will be.
Couple years back, I had about $50,000 in credit card debt, mostly due to trying to make it with my own business (running this very blog) and also being jobless for a period of about 12 months.
In those periods of my life, I saved everything, I even stopped buying my favorite wine (which I used to spend $10+ day on), and learned a lot about how to get rid of debt.
Here’s some tips from my own experience as I have zero debt now:
- Keep detailed track of how much you have in the bank by using a simple spreadsheet. I use GoogleDocs because I can access it anywhere I go and update my spreadsheet with every dollar I spend on anything. If you don’t keep track of how much money is flowing in and out of your bank account, you will never know how much money you have and could end up with a huge amount of debt when you could avoid it.
- Always forecast up to 3 months on things you will spend. For me, I have to forecast how much expenses I will spend on my blogging business, food, rent, and all of that but I know exactly where I will be in 3 months. By forecasting, you will set yourself a “goal” and you will know how much you can spend on everything. The next time your brain tries to go on a shopping splurge, your forecast will tell you not to.
- Eat out less often, cook more at home. At one point in my life, I used to spend like $30 to $50 on food like every other day by dining at Sushi restaurants and whatnot. Although this can be very pleasurable for your stomach, it can be devastating at the end of the month when you find out you spent way too much on eating out. Besides, cooking at home is a lot more healthier for you. If you need ideas on cooking, check out our cooking section.
- If you have credit card debt and pay monthly interest, call your credit card company (like everyday) and ask them to lower your APR. And ask them you want to talk to someone in charge, the manager. If you do this enough, they will lower your APR to as low as it can be.
Lastly, just remember that no matter how much you make, if you don’t know how to manage your money, you will always end up in debt.
On the other hand, if you know how to manage/save your hard-earned money, you will be able to have zero debt and also make most use of your money plus use your credit to buy things you thought you couldn’t afford.