Curtail credit card spending
Stop using credit cards! Put them in a cup
of water and freeze them. Better yet, cut
them into tiny pieces. Leave the accounts
open, but eliminate the temptation the cards
present. It isn't wise to close out the accounts
while still carrying a balance as this might
trigger a punitive interest rate from the
issuer. Also, should the debt-to-available
credit ratio rise suddenly, this could lead
to punitive interest rates on other cards
or could prevent a balance transfer at an
attractive interest rate later on.
Use cash or debit cards instead of charging. Even check writing has gotten Wendy into trouble by triggering an overdraft loan at 14 percent interest that will take another two years to pay off.
Credit card debt isn't her only problem. Overspending coupled
with a lack of savings perpetuates the debt
cycle. That's why I am not going to recommend
using a home equity loan to consolidate this
debt. Until she demonstrates a commitment
to live within her means and dedicate herself
to debt repayment, such a move is likely to
backfire.
To that end, it is important to do the following.
Create a budget
Begin tracking every expenditure. Money is
disappearing via ATM withdrawals and the debt
load is a direct result of overspending. Wendy
has done a good job of recording much of what
she spends but it must be taken to the next
step -- reconciling that against a monthly
budget and the money coming in. She needs
to focus on living within her means and throwing
as much money as possible against her debt.
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