Just as sodium is a killer buried in Canadians’ diets, so too is cash in your financial life. Cash may be king but it can also crush your ability to get rid of credit card debt.
I find that most people withdraw two to four times as much cash from their bank accounts as they think they do.
“I’m living paycheque to paycheque!” is the common lament. “No,” I say, “you’re spending paycheque to paycheque and the ATM is the culprit.”
As a result, when the credit card statement comes there’s barely enough to pay the minimum. But you can free up that extra money by curtailing the cash you run through.
For the short term stop all cash expenditures except for a nominal amount, say $20 to $30 for incidentals. Take that amount out in cash weekly. If you have kids, there always seems to be a few dollars needed here and there. Empty your pocket or purse daily and stash the coins in Auntie Meg’s old broken teapot to build up a kid cache.
Now, put your credit card away. Instead, use your debit card but estimate what you require monthly for essentials such as groceries, gas, household bills, etc. With every paycheque track your spending to ensure you stick to the budget.
Spend no more than the estimated amount! If you have to do without, so be it. Pay whatever bills are due during your pay period, even if it is a bit early. The trick is to not fool yourself into thinking you have more money to spend than you actually do.
Now here’s the secret. Take whatever is extra every paycheque (not every month) and put it on your credit card balance. Don’t wait for the statement to come. Voila, the balance will melt away.
Once the debt is gone stick with the program and devote the extra money to building up some savings so you will never have that sinking feeling when the credit card bill arrives.
Alison’s Money Rule:
If credit card debt is overstaying its welcome in your life, banish it by controlling your cash habit.
– Alison Griffiths is a financial journalist, author and host of Maxed Out on the W Network. Write to her at firstname.lastname@example.org.