Written by Mary McKeague, Financial Counselor with LSS

Everything seems to be going fine until the economy takes a turn for the worst, you lose your job unexpectedly, hours are cut, self-employment income is lost, and you can no longer afford all of the bills that are due every month.  You do the math over and over again and it always seems to come out the same: You end the month in negative numbers.  You are forced to cover the cash flow shortage with credit cards and as debt balances grow, your confidence shrinks, and the hopelessness settles like a fog that blinds you from any realistic solution.

So, where do you even begin when tackling overwhelming credit card balances?

If you are drowning in debt, you are not alone.  Your gut instinct might be to pay off the highest interest rate credit card balance as fast as you can. When I tell people during counseling sessions to only pay the minimums for right now they look at me blankly and probably secretly wonder if perhaps they should request a different counselor.  If you really want to create a permanent solution to your debt problems, then you can’t put the cart before the horse.  If you try to pay extra to the credit cards before you’ve taken the time to create a positive cash-flow situation you will almost certainly end up charging up the credit card balances again in the future to cover your budget shortage or to cover that car repair you failed to set money aside to savings for.

And around in circles you go, like a dog chasing his own tail. No wonder you are exhausted!

If you are ready to start moving towards a real solution, then the first thing you need to do is stop using the credit cards completely and this might require you to only pay the minimum monthly payments on credit card balances for right now to ensure you have enough income to afford all of your other bills and expenses.

Think of it this way, if your goal is to climb out of a deep ditch, then the last thing you should be doing is digging deeper right?  Keep at it long enough and you could end up digging yourself right down to bankruptcy, not China.

Show me the money!

Remember, your ability to pay back debt depends on how much income you have left after you pay your priority bills and living expenses. You cannot create an aggressive plan to tackle debt without first knowing how much of your income you can realistically afford to throw at it.  You cannot pay extra to debt if it causes you to miss more important monthly bills, buy groceries, or other basic necessities.

You need to start by gaining the clearest picture of your financial situation as possible so you are able to create a budget that is realistic enough for you to actually stick to. You will need to make some decisions about how you will adjust your spending to achieve your goal of becoming debt free.

So let’s review the three steps to start breaking the cycle of credit card debt:

  1. Stop using the credit cards
  2. Don’t pay extra until you’re sure you have it.
  3. Know your cash-flow and create a realistic budget.

You can choose to move towards a long term solution right now rather than continue on the not so merry-go-round of living with debt.

Need help creating your long term financial solution?

Call LSS Financial Counseling today 1-888-577-2227 or visit our website at www.ConquerYourDebt.org and schedule a free appointment with one of our Debt/Budget counselors. Or you can always email me at financialcounseling@lssmn.org. You will feel confident and more succesful when you learn how to manage your finances. You can do it!

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