Why are the majority of consumers living beyond their means? We all have debt, this is what is forced upon us, but why is it that our debts, are about the same as what we can afford, or exceeds what we can afford?

It is fiarly straight forward. This is what the banking institutions allow, this is the ideal siuation for them and this is how they make so much money. The worst part is that they don’t care if we end up behind in payments.

We all like to get our money on time, but your debtors actually prefer the opposite. They prefer you to be late!

Now keep in mind they don’t prefer you to be too tardy or to completely miss payments, but a week or two is just perfect for them. Let’s just think what a delinquent account means to them. You still make your payments, but you are a bit late. Their penalty for being late is thirty dollars. They just made $30 for doing nothing. You are already living beyond your means, so this penalty for being late puts you above your credit limit. This gained them another $30 for, again, doing nothing.

You can now make your monthly payment of twenty dollars. The math will not work in your favor. Let’s just pretend that you are charged $15 in interest for the month. Your total costs are; $15 in interest + $30 penalties + thirty dollars over limit fee totalling seventy five dollars charged to your account. You make a payment to them of twenty dollars, which leaves you $55 in more charges than when you started and you have absolutely zero to show for it.

This is why credit card debt is evil and we must learn to do without them!

The first step in this process is to gather up all of your credit cards and destroy them. You can save one or two, but get rid of the rest. Just pick the ones with the lowest interest rates and preferably no annual fee. Store your select few in a safe place that is not easily accessible.

This may seem extreme, but most people do not have the will power to simply not use the card. They look at their statement, see $50 or $100 dollars in available credit and look at it as free money. There is no such thing.

If you can’t bring yourself to cutting up your cards, at least gather them all up and store them somewhere that would take some effort to get to. A safe deposit box is always a good idea. You can also have someone that you trust hold on to them or hide them.

The key is to not have them accessible for those impulse purchases that we come across every day. Once we pass the moment, chances are that we will realize that we don’t need to make that purchase or probably forgot about it all together. We are now even closer to getting out of debt.

Don’t forget to cancel the cards that you are no longer going to use. Most credit cards have an annual fee, anywhere from $30 to $100. This is wasted money that you can use to apply towards the balance.

Some cards may charge you a closed account fee to persuade you to stay with them. At this time you need to analyze the impact. I recently cancelled a card that is charging me $3.50 a month in closed account fees. My annual fee is $59. 12 months at $3.50 is $42. I am still ahead of the game by $17, or more, if I pay it off within a year. The most important part is that there is no way that I can use that card again and worsen my situation.

Now that the temptation is out of the way you can start paying them off. Just remember to pay at least the minimum, pay all accounts on time, and stop using credit. Now step back and enjoy the road to financial freedom.

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