When working as a mortgage loan officer, reviewing financial profiles occurred daily for me. An increasing number of average American households are in debt over $15,000 with credit cards alone. Why Is That a Problem? The basic design of uncollateralized debt does not allow the minimum payment option to repay the borrowed money! When the contracted rate of interest, is calculated EVERY month based on the NEW balance, and THEN is added to the existing balance it makes it perpetual; NO ENDING DATE.

With a car loan or a mortgage there is a specific amount of time worked into the repayment. That is what makes a credit card so monstrous, when the balance increases, so will the interest charges. Credit cards truly can be financially devastating. Is it any wonder that credit card companies target young people like high school graduates and college students?

In the first place, most of them do not understand how they work and once they are short on cash due to making payments, they will charge even more creating this devastating cycle. With a car or a mortgage loan there is a specific amount of time worked into the repayment plan. These loans give disclosures that notify you as to when the first payment is due and when the last payment is to be paid, they are radically different type of loans.

What can we do about it? The following are strategies you can use now to get back on track. It is not easy but it will be very much worth it.

1. Track your monthly expenses and create a Budget. List everything you need and what you expect to pay then enter in the amount when it is transacted, this will monitor if you are on budget, over budget, or ideally under budget-when (notice I said when you have to stay positive) this occurs, allot that amount over to pay down ( ON THE BALANCE) of the credit debt.

2. Pay for your items with cash only. You will break the habit of using your credit card and stop adding to your existing debt. Keep one for emergency use only.

3. Earn more money by taking a second job to pay your debt back and do it faster.

4. If you need help there is debt counselling available to you.

Deciding to make this change is a smart move and once your realize that your choices have gotten you into this situation, then you can refocus on living within your means and replacing old habits with new ones. Being frugal does not mean giving up all life’s pleasures; it just means changing how you look at money. Be creative and enjoy the process and you will be amazed at the progress you make. Remember… it will get easier as you notice the progress you are making so sit back, buckle-up and prepare for the journey.

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