Debt is an ugly four-letter word. It comes in all shapes and sizes, and generally includes mortgages, auto and student loans, credits cards and more. In fact, as of December 2015, an average American household was estimated to have $130,922 in debt, with $15,762 belonging to credit cards. Even more staggering is the total $733 billion of credit card debt owned by U.S. consumers coming into this year.
As credit card debt is considered to be a costly threat to your financial success (and one of the worst kinds of debt), it's often reviewed first when putting together a financial plan. One overlooked question, however, is what comes next. What if you stuck to your plan and got those pesky credit card balances down to zero? What steps can you take to ensure you don't rack up those bills again?
Below are my top three recommendations for keeping those credit card balances in check now that you've greatly reduced or eliminated your debt.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Cut Up Those Credit Cards
As cliché as that image has become, this is an essential first step. There are a lot of psychological factors that go into acquiring debt, and if you were prone to racking up debt in the past, chances are you are prone to do it again. Don't take the risk. Cut up your credit cards and rely on a bank debit card. This will ensure you only spend the money you actually have—not the funds your credit card company so generously lets you borrow.
Check Yourself and Remain Accountable
Accountability is key when it comes to keeping credit card balances in check. At a minimum, schedule an annual financial check-up to build in that accountability. This can be done in a variety of ways—be it with a family member, a spouse, financial planner or even YOURSELF. Knowing that this event is on the calendar will hopefully provide you with the needed motivation to stay on track.
Utilize Tech Tools
With the advent of technology, mobility and online resources, it's now possible to find solutions to virtually anything using tech tools. Why not leverage technology to get a comprehensive view of your financial well-being? You can do this with the help of a financial professional or even complimentary sites, such as mint.com. Use these tools to track your spending or set budgets, and make it a habit to log in once per week to ensure consistency and results.
While there are plenty of reasons people fall into debt, more often than not, debt begins to spiral out of control because people neglect their finances. They are afraid to look, and by the time they get the courage—it's too late. Be proactive, take control and use the necessary tools to stay on track of your debt. The less you owe, the more you own, and the better chances of a successful financial life.
Taylor Schulte, CFP® is founder and CEO of Define Financial, a San Diego-based fee-only firm. He is passionate about helping clients accumulate wealth and plan for retirement.
-
The AI Doctor Coming to Read Your Test ResultsThe Kiplinger Letter There’s big opportunity for AI tools that analyze CAT scans, MRIs and other medical images. But there are also big challenges that human clinicians and tech companies will have to overcome.
-
The Best Places for LGBTQ People to Retire AbroadLGBTQ people can safely retire abroad, but they must know a country’s laws and level of support — going beyond the usual retirement considerations.
-
Home Insurance: How to Cut Costs Without Losing CoverageNatural disasters are causing home insurance premiums to soar, but don't risk dropping your coverage completely when there are ways to keep costs down.
-
Why Homeowners Insurance Has Gotten So Very ExpensiveThe home insurance industry is seeing more frequent and bigger claims because of weather, wildfires and other natural disasters.
-
Stick to the Plan: Don't Panic During Economic UncertaintyTake a breath and step back. Focus on a solid fiscal foundation to stabilize your investments during stock market volatility.
-
How Inflation Affects Your Finances and How to Stay AheadThe cost of goods and services is certain to rise over time, making it essential to have a financial plan that will help you keep pace.
-
Now's a Great Time to Become a Financial Adviser: Here's WhyThere's a growing need for financial advisers. Why not take on a role that offers earning potential and work-life balance and helps change lives?
-
His Employees Don't Work 'For' Him, But 'With' HimWhile it might not seem that way, there are indeed employers out there who value the relationships they have with their employees. Here's an example.
-
How to Balance Your Insurance Expectations vs the RealityJust because you have an insurance policy doesn't mean that you're totally covered in the event something bad happens.
-
When Your Car Is Fixed, But You've Still Got the ProblemThis reader's experience with trying to get squealing brakes fixed under an extended warranty mirrors what others are experiencing these days.
