How to Eliminate Credit Card Debt: A Realistic Plan

Q: Each year I make a New Year's resolution to tackle my credit card debt. I never seem to get anywhere. Can you help me?

A: A plan to tackle your credit-card debt is a great New Year's resolution. A realistic plan will help you shed the weight of your bad debt and help you get on track again.

Start by listing how much you owe and how much interest you are paying. Then prioritize your obligations; mortgage and vehicle payments are typically at the top of the list.

Next , track what you're currently spending. Before you can make any changes, you need to identify what you can change.

Ask yourself the following questions:

  • Where can I trim expenses?
  • Can I generate some extra income?
  • Should I suspend regular investment contributions while I'm paying down debt?
  • Is consolidation of my debt a possibility, assuming it's at a lower interest rate and I don't incur more debt?
  • Do I need assistance to consider my options objectively and develop a workable plan?

Finally, create a realistic monthly budget that allows you to live within your means. Include a savings component for seasonal expenses and emergencies. Put your credit cards away and use cash or your bank card to manage your expenses and bills.

You may need to put long-term goals on hold while you are fine tuning your money management skills and paying down your debt. Keep in mind that what you owe on your credit cards, loans and lines of credit will impact how much of a mortgage you can afford.

The weight dragging you down might be the maxed-out cards in your wallet. It's never too late to start losing the weight -- one card at a time.