After setting up the $1000 emergency fund in Step 1, it is time to work to eliminate consumer debt.
We have learned some hard lessons about the evils of credit cards.
We should know better, because the Bible clearly tells us "...the borrower is servant to the lender." (Proverbs 22:7)
Even so, we ended up running up a mass of credit card debt. That was the easy part. Like every bad habit, we attempted to overcome the problem. We started a new financial diet every 6 months. We cut things here or there. We added income. Yet, we always fell off the wagon. We never followed the first rule...
Rule 1: No new debt.
We cannot get out of debt, if we continued to add debt. Of course that makes mathematical sense! For the past 3 years, we have slowly reduced the amount of debt we were adding. Reducing is not the same as eliminating! We have been practicing not using our credit cards off and on all year. This summer, we made a real commitment to eliminating our consumer debt---and we shredded the credit cards!
The credit card companies must have noticed the change. They appear to be fighting back, demanding we continue to add debt. Some have raised our interest rate. Some have doubled our minimum payment. Some have reduced our credit line. Some change the due date each month, moving it forwards and backwards on their whim. Their tricks and games are frustrating. We have to remain extra vigilant to make sure we are not trapped into paying extra fees.
I was growing frustrated because each of their tactics added to our monthly minimums, which reduced the "extra" payments we were trying to make to reduce the debt principal. It looked like we would take years to get out of debt at that slow pace. Then, an idea struck me this week....
Our vehicles are secure assets.
We went into our credit union and inquired about taking out loans against our vehicles, to pay off the meanest of all our credit cards. We know we cannot borrow our way out of debt. We were hoping to re-arrange our debt, to better our situation. It worked. Thankfully, we have been vigilant about making payments on time, so our credit score encouraged the credit union to offer us their best rates. The loan adviser said that many folks were doing the same thing....taking out auto loans to pay off credit cards....so it wasn't my original idea.
In the end, we have paid off a big, evil credit card, and replaced it with an auto loan that has a low fixed interest rate, a low fixed payment, a defined term for when it will be paid in full, with our credit union, who is much nicer to do business with. Since the auto loan payments are less than the credit card minimum, we have freed up some money to apply toward paying off the next credit card in line.
Hopefully, we can pay down the other cards faster than those companies can find new tricks to try to trap us.
We have learned some hard lessons about the evils of credit cards.
We should know better, because the Bible clearly tells us "...the borrower is servant to the lender." (Proverbs 22:7)
Even so, we ended up running up a mass of credit card debt. That was the easy part. Like every bad habit, we attempted to overcome the problem. We started a new financial diet every 6 months. We cut things here or there. We added income. Yet, we always fell off the wagon. We never followed the first rule...
Rule 1: No new debt.
We cannot get out of debt, if we continued to add debt. Of course that makes mathematical sense! For the past 3 years, we have slowly reduced the amount of debt we were adding. Reducing is not the same as eliminating! We have been practicing not using our credit cards off and on all year. This summer, we made a real commitment to eliminating our consumer debt---and we shredded the credit cards!
The credit card companies must have noticed the change. They appear to be fighting back, demanding we continue to add debt. Some have raised our interest rate. Some have doubled our minimum payment. Some have reduced our credit line. Some change the due date each month, moving it forwards and backwards on their whim. Their tricks and games are frustrating. We have to remain extra vigilant to make sure we are not trapped into paying extra fees.
I was growing frustrated because each of their tactics added to our monthly minimums, which reduced the "extra" payments we were trying to make to reduce the debt principal. It looked like we would take years to get out of debt at that slow pace. Then, an idea struck me this week....
Our vehicles are secure assets.
We went into our credit union and inquired about taking out loans against our vehicles, to pay off the meanest of all our credit cards. We know we cannot borrow our way out of debt. We were hoping to re-arrange our debt, to better our situation. It worked. Thankfully, we have been vigilant about making payments on time, so our credit score encouraged the credit union to offer us their best rates. The loan adviser said that many folks were doing the same thing....taking out auto loans to pay off credit cards....so it wasn't my original idea.
In the end, we have paid off a big, evil credit card, and replaced it with an auto loan that has a low fixed interest rate, a low fixed payment, a defined term for when it will be paid in full, with our credit union, who is much nicer to do business with. Since the auto loan payments are less than the credit card minimum, we have freed up some money to apply toward paying off the next credit card in line.
Hopefully, we can pay down the other cards faster than those companies can find new tricks to try to trap us.
I am just glad we have never gotten sucked into the credit card trap. We have been good at only using them when we know we will pay them off before any interest or fees apply. It is a challenge some times though because well, we are all coveters!
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