Help , I’m in Debt!

A new skirt here, a getaway there – you’ll just pay it off later, right? Wrong. Getting on top of your credit cards and other IOUs starts right now.

Portrait of Tammy Strobel
A new skirt here, a getaway there – you’ll just pay it off later, right? Wrong. Getting on top of your credit cards and other IOUs starts right now.
Corbis/Click Photos
Corbis/Click Photos

1. Run to the pain

Debt and denial go hand in hand, and credit card spending is insidious because it’s so “invisible”. Begin your turnaround by tallying up your debt so you know exactly where you stand. It will feel nasty, but don’t fret because it’s the start of a new life.

2. Know you are in control

It’s very easy to blame messy finances on just about everything from “the economy” to “my parents’ terrible example”, but those things have almost no impact compared to your own cab habit or taste in sexy shoes. The problem and the solution are in your hands.

3. Identify your own debt traps

Do you double spend every dollar (spending all your cash and the same amount on cards, feeling like it’s the same dollar when it’s not)? Are you a sucker for bargains, sales, credit card rewards or e-mails from ASOS? Notice them, then nix them.

4. Don’t be a social media sucker

When you see a friend’s Maldives snaps on Instagram, you feel like you ought to be able to afford the same sort of vacay. Chances are she’s charging it, so focus on your own reality, not her unreality.

5. Re-evaluate “status” symbols

That A-Wang bag you still owe the bank $2,000 for (plus interest!) only looks like a status symbol. A healthy savings account and a credit card paid off in full each month are so much cooler.

6. Get cash-tastic

When heading out for a big night, leave your card at home and take a reasonable amount of cash instead. When it’s gone, your night’s over. No debt hangover in the morning!

7. Understand hedonic adaptation

You lust after something for weeks and weeks. But when you finally get it, suddenly it doesn’t feel as exciting anymore. That is hedonic adaptation: the brain’s ability to get used to things that once felt like luxuries. This is one of our main reasons for constant, everhigher spending. Once you understand how your brain is tricking you into wanting more and more, imagine yourself on the other side of that purchase and you’ll be less inclined to go through with it.

8. Enjoy your first taste of freedom

Congratulations! You’ve managed to say no to that “little” something. Now, it’s time to let the amazing momentum build from here.

Money advisor Ali Cassim shares her tips on getting credit-card savvy.

1 Don’t be so overly focused on credit card rewards. Usually, to earn that free flight to Melbourne, you will have had to put 10 times the cost of it through your card.

2 Be wary of interest-free periods. If you’ve committed yourself to attacking your debt once and for all, rolling it over to a new card with zero balance transfer can be a really good idea; but check what the rate will be if you don’t achieve that in the given time.

3 Don’t have direct debits coming off your credit card. They add up without you even noticing.