Today credit is the most aggressively sold product in the world. If you have fallen into the trap of credit cards and want to be free of them once and for all, my husband and I recommend this.
There are people who are convinced that without their credit cards they could not lead a normal life. In the 1980s, credit companies discovered how lucrative it could be to sell or promote debt at 18 to 32 percent interest. As expected, their earnings increased in a scandalous way and the perception that debt was a way of life became general among the population. It is not strange then that today credit is the product that is sold most aggressively in the world.
Many people believe that a credit history is necessary in order to purchase a home or vehicle. As if this were not enough, the parents themselves encourage young people to use cards and credits as part of their initiation in the area of personal finance.
The biggest lie out there is that debt should be a part of life and that it is also an indicator of success: you are enviable if you have an excellent credit history and therefore can get many expensive items, no matter how much interest you are. paying for “your lifestyle.”
Statistics provided by the Association of American Bankers in March 2010, showed that the amount of debt acquired by an average family was 8 thousand dollars in the United States. What gives us an idea of this indebtedness as a way to have possessions.
If, unfortunately, you have fallen into the trap of debt and want to be free of it once and for all, my husband and I recommend that you take the following measures:
1. Create a start-up emergency fund
The first step is to make only minimum payments on your debts until you manage to save the equivalent of a thousand dollars (15 or 16 thousand Mexican pesos) as your first emergency fund. With this saving you will avoid using your cards again while you work on paying off your debt. Remember to have this initial savings ready and use it only for emergencies!
2. The “snowball” method
Second, you should use this method that consists of organizing debts in order from smallest to largest. The main mistake people make is trying to pay off the biggest debt first, or the one with the most interest, which affects their emotional appearance. If you focus on the biggest debt first, it will take a long time to pay it off, you will not feel like you are making progress in your goal, and it may be that you give up early. Instead, when you set a goal that can be achieved in the short term, such as paying a small debt, that will give you the motivation to keep going.
3. Double and triple payments
The third step (which is part of the previous one) consists of doubling and tripling the payments of the following debts. When you finish paying the first debt, what you previously paid monthly for it now you have to contribute for the next card, plus what you are already paying each month for it. You are now making a double payment for the second card, which will cause you to finish paying it sooner. When you settle this debt, you will have the two previous payments available to settle the next one, and so on. Before you know it, you will have settled all your debts.
4. Complete the emergency fund
Now that you no longer have credit card payments, you should focus on saving the equivalent of three months of your salary (six months is ideal), or if you have two incomes, save the equivalent of three months of both salaries. This savings remains exclusively for emergencies and to never use credit cards again. If you lose your job, or have an accident or some other setback, you know that you have that money in the bank. Every time you have to use your emergency fund, it should be your priority to replace that money.
5. Use the scissors!
And the most radical and exciting step is to cancel all your cards and cut them into pieces! Which indicates that you have learned your lesson and that you will never fall into the debt trap again. Being debt free, and counting on your salary and six months of savings in the bank exclusively for emergencies, who needs to pay interest?
Now, get ready to be different and experience what financial expert Dave Ramsey calls “financial peace.” Related to this, I invite you to read these articles:
Read: The 7 financial sins of young women
Or you can read: 3 things you should do to protect yourself from financial crises