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.
-
Stock Market Today: Cautious Investors Let Stocks Drift LowerMarkets weigh encouraging trends for earnings and tariffs against concerning signals from U.S. consumers.
-
A Smart Way to Combat Economic RollercoastersSavings With rates on CDs remaining high for now, a CD ladder allows you to maximize your returns with flexibility to your cash when you need it.
-
Time to Spring-Clean Your Finances: A Financial Professional's Four Steps to Tidy Them UpA midyear review of everything from spending to saving, with adjustments as needed, can set you on track to financial security. Plus, don't forget to check in on your workplace benefits.
-
Why a Law Firm Secretly Recording Client Conversations Is Wrong (and Illegal)A law firm that has been recording client conversations without the clients' knowledge or permission and has threatened employees if they speak out faces legal and ethical challenges.
-
Donating Complex Assets Doesn't Have to Be ComplicatedIf you're looking to donate less-conventional assets but don't know where to start, this charity executive has answers, such as considering a donor-advised fund (DAF) for its tax benefits and ease of use.
-
I'm an Insurance Pro: How Not to Get Dumped by Your Insurance AgentYour insurance agent or broker might show you the door if you do any of these five things. Being a good customer is about more than paying your bill on time.
-
The Four D's That Could Force You to Sell Your BusinessBusiness owners (or their heirs) can be rushed into a sale of their company if they haven't planned for a major change in circumstances — or the four D's.
-
Do You Need Disability Insurance? Three Things to KnowDisability insurance can help replace some of your income during unexpected life events. Here are the basics, courtesy of a financial professional.
-
How to Turn Education Planning Into Retirement PlanningNervous about investing in a 529 plan? If college doesn't pan out, the money can now be rolled over into a Roth IRA, which will grow tax-free until retirement.
-
We Took Them in After the Fire, and Now They Won't LeaveA well-meaning older couple responded to a young couple's plea for help. Now they're looking at having to evict tenants rather than simply asking houseguests to go. How could this happen?
