credit card debt has increased by 13% over the past year – the biggest increase in 20 years. If you find yourself with mounting debt, you need to get yourself back on solid footing before it spirals out of control.
As I’ve learned from coaching thousands of people how to shed credit card debt and stay debt free, the answer is more than just cutting up the credit card.
This mix of thought and behavior changes along with some crucial financial moves will get you there.
Change how you talk about money
To really know your “money self,” pay attention to what you say and hear about it at work, at home, and with friends. There is often a tendency to focus on the negative. Change your language if you want to change the way you think about money. This is the first step in improving the place of money in our lives.
Start using positive language about money today. Start saying, “I choose not to buy this item” or “This is not a financial priority.” This shows that you are making conscious choices.
On the other hand, saying “I can’t afford it” shifts the responsibility away from you. You become the victim of something beyond your control, which means you have nothing to do with it.
For example, if you decide to buy a more expensive home with higher mortgage and maintenance costs, you might not need to spend as much on vacations, clothing, or a big-screen TV. That doesn’t mean you can’t afford the big-screen TV – it just means you’ve spent your money elsewhere. Your decision reflects what is important to you.
Mindset is a powerful influence, and the language you use can support that shift. Use positive words to support this change. If you tell yourself, “I save a little bit every month,” your perspective changes as you build savings no matter how little your savings account grows.
It is important to strive to use language that demonstrates ownership and responsibility around money. Positive language changes our attitude towards money if heard often enough.
Negative reinforcement about the state of your finances, even if it’s self-talk, affects self-esteem. Stop bashing yourself with negative language like “I’ll never get out of debt” and “I’m a financial failure.” There is a psychological cost of debtand studies have found links with depression and suicide.
You are not a victim of your financial situation.
Change your behavior slowly
Don’t consider a debt consolidation plan or home equity loan until you’ve stopped creating new credit card debt.
While that mountain of debt can go away, people typically have their previous balance back, even if it’s a five-figure sum, in as little as six months if they pay off their credit card debt in one lump sum. This is because there has been no accompanying change in behavior. Instead, invest your time in behavior changes.
Like changes affecting food, slowly and steadily winning the race in forming new money habits. Start by checking what’s on your credit card statement each month. People often find recurring expenses for services they don’t even use anymore, or worse, something they never signed up for! Take the time to debit them from your credit card.
Are there other automatic payments for services you use that you can forgo until you pay off your debt? Every $10 saved also reduces interest costs and gets you to the payout point sooner.
Choose to live without fees for a month while creating a sustainable plan for your financial life.
A credit card break will help you build a new thinking habit before you swipe, click, or type. Keep using this new language when it comes to financial decisions to make this easier.
When you limit your spending, be honest with your friends. Meet for drinks instead of dinner or coffee instead of drinks. If you value spending time with your friends, they will understand alternative, creative plans and may even be happier.
Start planning for the holidays now. Talk to the family to ask them to “simplify the holidays.” Suggest that each person give a gift to just one person instead of giving gifts to everyone, or that everyone contribute food for the meal. If you take the lead, you might be surprised at who else feels relieved and grateful.
Create a spending plan
Once you start changing your language and limiting your credit card use, it’s time to face your numbers and develop some new lifelong habits.
On the financial side:
Always pay the minimum of your credit card debt. Otherwise you deposit more Penalties and Fees.
Until you create a spending plan that allows you to live within your means and see the bigger picture, only pay the minimum. (Yes, you read that right.) Struggling with the discomfort of knowing your total debt will help clarify why you need to make changes in your behavior and language. It takes a while to get into debt. It will take a while before it returns to zero. Remember that a quick fix is not a permanent fix.
Create a plan that allows you to cover your expenses with your income. Your net income is decisive – not your salary. Write down all of the expenses you incur throughout the year, not just the monthly ones. The physical act of doing this, rather than just reading a summary of spending over the past year, makes you more aware of your spending Your brain processes the information better. Seeing the difference visually can help you better understand why there is a burgeoning debt problem.
Plan something that you consider enjoyable—eating out once a week, a movie a month, or something else you enjoy. If you budget money for fun, you’re more likely to stick to your spending plan and continue to use positive language.
As a powerful reminder of how the combination of new language, new behavior, and a new approach to spending can improve your finances, I offer one of my favorite examples, a client who told me she “never got out of debt.” I tried.”
I asked her to try again. I challenged them to two simple tasks each week: first, create a way to save money, and second, have fun with just $10 a week.
After six weeks she showed up in my office energetic and smiling. “I tried so many new things! Save money by going to the library instead of buying a new book. Then I invited a friend over for coffee, which was fun.” She continued the list of new behaviors that fit into her cash flow plan, from an afternoon showing to canceling two movie subscriptions.
I asked about the settlement of her debt. She smiled: “I pay the minimum and live entirely on my income. I already saved $150!”
In the end, she paid off her debts over the year and then stayed debt-free.
Research shows that it can take as little as 18 days to form a habit, although it takes weeks longer for some people. The key is not to give up when you make a mistake. Just get yourself back on track without negative language or resorting to old behaviors.
Consider other resources for support: Debtors Anonymous, books, podcasts, and therapy that may be covered by insurance will remind you that you are not alone and that there is a way out. My favorite book is How To Get Out of Debt, Stay Out of Debt and Live Prosperously Forever by Jerold Mundis; the last edition was published in 2012.
Do you feel like this slower approach will never get you out of debt? Consider this: If money solved money problems, lottery winners would never go broke. However, many of them do. More important, in an interview five years latermany wished they had never won.
Debt is not just a numbers game. Start changing your behavior and language now and create a cash flow plan. The long-term effects will be felt for years to come.
CD Moriarty is a certified financial planner, columnist for MarketWatch, and personal finance speaker. She blogs at MoneyPeace.
Learn how to shake up your financial routine at MarketWatch Festival of the best new ideas in the money on September 21st and 22nd in New York. Join Carrie Schwab, President of the Charles Schwab Foundation.
More from MarketWatch
This financial planner’s safe secret lets you spend less effortlessly
This couple went from saving almost nothing to 70% of their income – so they’ve changed their mindset
With passion budgeting, you can keep what matters most and still get your finances in order
Spending tracking was a wake-up call: how this couple paid off a $71,000 debt in 5 years
https://www.marketwatch.com/story/you-work-hard-to-pay-off-debt-heres-the-secret-to-keep-you-from-backsliding-as-the-economy-slows-11660929550?rss=1&siteid=rss Opinion: You work hard to pay off debt. Here’s the surprising secret that will keep you from hitting back when the economy slows