Many medical students and residents use credit cards throughout their training to help cover their expenses, and if that’s you, you’re not alone. In fact, the average credit card debt for a U.S. household carrying a balance is over $16,000.
In addition to having debt, many Americans have more debt than savings too. If this is you, you probably realize that it’s time for a change. After all, debt prevents you from living the life you actually want and being able to reach your biggest financial goals.
Plus, if you’re a young doctor, you likely already have significant student loan debt; credit card debt is an added burden you can live without.
Of course, when you’re living with debt and working tons of hours, it can be hard to know the first step to take to get rid of your credit card debt for good. To help get started with the process, below are 4 steps you can take to escape your credit card debt once and for all.
1. Analyze Your Expenses
In order to get your debt under control, you will need to start by analyzing the amount of your mandatory “fixed” expenses (rent, food, utilities) as well as identify all the unnecessary expenses that caused you to get into debt. You can do this by looking back at your credit card statements from the past few months to see what you spent your money on. Once you know your weak points, it’s easier to be more aware of them moving forward.
2. Find Ways to Reduce What You Owe
There are a few ways you can reduce what you owe on your fixed expenses. If you have a mortgage, try to refinance for a lower interest rate while rates are historically low. If you are renting and your lease is about to expire, downsize and lower your monthly payment. Cancel your cable, or call up your cable company and negotiate a lower rate. Take a hard look at your cell phone plan and see if there is a way to reduce your monthly bill.
When it comes to your credit card, you can often get an interest rate reduction to help prevent your debt from increasing too much while you’re trying to pay it down. The best way to do this is call your credit card company. If you have a good credit score and a solid payment history, call them and ask for a rate reduction. Look into balance transfers with other credit card companies to take advantage of the 0% transfer rates.
3. Set Up a Budget
After you reduce your fixed expenses as much as possible and analyze your spending, set up a budget, avoiding all unnecessary expenses, and make a commitment to stick to it.
This means that while your credit card debt is still outstanding, you should avoid going out to eat, drinking with your buddies, and taking vacations. It all needs to stop until the debt is extinguished; remember, this is only temporary.
Plus, you can do this. If you were able to find the discipline to study in medical school, you can absolutely find the discipline to pay off your credit card debt once and for all.
4. Change Your Outlook on Money
Once you pay off your credit card debt, it’s important to change your outlook on money to avoid falling back into the debt tra again. Remember, every dollar that you earn or save has a purpose. Every dollar of debt that is paid off will create an exponentially larger number of dollars during your lifetime. Imagine if you didn’t have to pay interest on your credit card but could invest that same dollar into a stock that paid monthly dividends. Instead of the dollar disappearing from your account forever, you have just invested that dollar wisely into a company that will pay income on that dollar for as long as you own it.
Overall, it will take extreme discipline to change your lifestyle, but it will be for the better. No one is perfect, and the mistake of accumulating debt (even though it’s a bad one) isn’t the end of the world. Good things actually will come out of this; it will just take some hard work and discipline to achieve it.
You will learn from your mistakes, but in order to retire, you need to destroy all bad debt from your life and rid yourself of the frivolous spending that got you there. 100% of your time, effort and money needs to be reallocated to paying off this debt as fast as possible. The quicker you pay down this debt, the quicker you will get ahead of the game and, ultimately, be able to achieve retirement. Depending on your age and amount of debt, it could literally save you decades off your working career.
The seemingly endless cycle of work, buy, and accumulate debt ends today. Don’t work a job you hate to pay off debt on a purchase you made years ago, it’s simply not worth it. There is only one way to escape the grind, and it isn’t through buying. It’s through hard work, smarter choices, saving and investing in your future. If you think about it, life is based on experiences, not “stuff”. Don’t trade away your time and energy to stay trapped in the debt cycle.
So, if you are still in debt, get more aggressive about paying it off completely. Remember, your retirement is at stake, so it’s time to take control over your money before it takes control over you. With enough time, dedication, and effort, though, it’s absolutely possible. You just need to take action – starting today.