Our previous article discussed a few steps how to get out of credit card debt, but I thought we would take it a little further.  They ask, Doc, once I get out of debt how do I prevent myself from making the same mistakes as before and getting right back into debt?  This is a very good question, and the answer is not as simple as one might think.  Sure it all boils down to spending less money, but that isn’t always an easy task.  So, here are a few ideas that may help you maintain your debt free lifestyle and avoid falling right back into the trap you just crawled out of.

As I discussed in our previous article it is necessary for you to create a budget for yourself in order to help monitor your finances.  Even after you are able to escape your debt you must continue to follow this budget strictly, tweaking it as necessary in order for you to keep it up to date with your finances and other such situations that may arise.

Another popular idea that I highly recommend in this stage is to visit a financial advisor.  Now, while seeking out help through articles such as this is a great help it is rarely enough to answer every question you might have.  A financial advisor is a very worthwhile investment that can really help you out in this sort of situation.  They can also help you allocate your resources wisely and in a way that is going to be strictly beneficial to you as an individual, whereas articles such as this are much broader and focus more on the masses than the individual.

We discussed in an earlier article the importance of spending money wisely, and that is essentially what you must do to stay out of debt.  The great news is that you have already been living a financially healthy lifestyle for awhile now since you were able to get out of debt, so it is important to continue along that trend.  However, all the money that you previously spent on getting out of debt can be used how you like.  One thing that I do recommend is that you save a portion of this money in case of an emergency.

Another very popular thing to do once you’ve escaped debt is to begin to save for something you previously didn’t have.  It is very hard to save for a car or house while you are constantly wrestling with your credit card debt, but now that it is gone the money you save will still be there in a few weeks when you check your balance again.  The ability to save is seemingly a lost art in today’s economy, but if you can master this skill you will live a much more comfortable life than those struggling with debt and overspending.

After you have paid off all of your credit card debt you must continue to live in a similar manner to the way that got you out of debt in the first place.  Too many times have I seen individuals fight for years to get out from under their credit card debt only to fall right back into it again soon thereafter.  The way this is avoided is by staying away from previous habits that got you into debt in the first place.  If you are able to master this small yet crucial skill you are going to be on the fast track to financial freedom.

Many people feel that they are so buried in debt they are never going to escape it, and that the mountain they must climb is far too steep to even begin to fathom.  However, I am here to tell you that this simply is not true.  They don’t call me the debt reduction doctor for nothing, and it is my job to find a cure for your symptoms.  Now, eliminating all of your credit card debt is a task that quickly strikes fear into the hearts of many, but it doesn’t have to be this way.

I have heard all kinds of excuses during my stint as the Debt Reduction Doctor, DRD for short, and all of them begin to sound the same after awhile.  Some people have too much debt, others don’t know how to get started, and some just keep piling more debt onto their already impressive pile of owed cash.  The trick to escaping credit card debt is diligence and perseverance, both of which are traits that can be learned and perfected.

First things first to all you credit card addicts, get rid of your credit cards!  Throw them away!  Burn them!  If hiding them in the closet is not going to be able to stop you from digging it out and spending more then by all means put it through the shredder!  There is one constant fact about credit card debt, if you don’t use your credit card you won’t rack up more debt.  This is much easier said than done for most.  If you are in a state where you are deep into credit card debt then you are probably very used to relying on your card in many instances.  This is a habit that must be broken if you want any chance of getting out from under your debt.

After you have gotten your credit card under control begin to set a budget for yourself.  I can’t remember how many times I have given the same advice, but I know I will say it again in the future.  Without a hard budget there is no way for you to monitor and check yourself on a consistent basis.  Sure, we all think we can do it mentally and have things just go through our brains but we cannot.  It is simply too much information for us to always be thinking about, which is why a hard copy of a budget is the perfect solution.

Now, after you have developed your budget you must remember that it can, and will change.  It is not set in stone, and it will vary depending on your income from month to month.  For instance, when you get a tax return you are going to have a few extra bucks lying around that could be spent on luxury items you cannot normally afford.  Or, you can do the responsible thing and use it towards your credit card debt.  Of course that’s not the most exciting choice, but that is what your doctor recommends.

Begin to chip away at the credit card debt you have established, but recognize that it is going to be a process.  It isn’t going to magically disappear after a few months of diligent payments.  This is generally a process that takes years to complete, so be sure you are ready for the long haul.  Eventually you will notice the numbers start to dwindle, and you will become excited about making your next credit card payment!  Don’t believe me?  Just wait and see, but it certainly feels good once you are coming close to achieving that ultimate goal.

Once you are out from under your credit card debt you are now in just as difficult a spot.  What you do after you get out of debt is going to be just as crucial as all the steps you took to pay off your credit cards in the first place.

I feel like I should almost start this lesson out with a tsk tsk, but that wouldn’t be fair to those who use the credit card so responsibly would it?  Now, since I am known in my social circle as the Debt Reduction Doctor, I figured it was only fair to share some of my views towards these credit cards with you, my loyal patients, to help everybody better understand the do’s and don’ts of credit cards.

Open-ended credit is available to anybody at anytime.  At any given moment, thanks to the marvels of the internet, you can instantly apply for thousands upon thousands of credit cards.  Now, almost every card is going to be different from the one before it.  Some have no annual fees and high interest rates, some have high annual fees and low interest rates!  Honestly folks, the credit card coaster is one that travels in outrageous patterns and hits all different cylinders.  The trick is to find the card that works best for your particular budget and way of life, and this is much more difficult than you might think.

When you apply for a certain credit card you are instantly given a credit limit.  Much of this depends on your credit history, but basically boils down to what the credit card companies are comfortable giving you to spend.  As you begin to use your card, responsibly of course, you must start making monthly payments on the balance of your card.  Your monthly payment is going to depend on how much money you owe, and will vary from month to month.   If you owe $200 one month your payment may only be $15, but if you increase that to $500 the following month you may be looking at a monthly payment of around $60.  Like I stated before, much of this depends on your interest rate and other details that are going to be different for every different card.  One quick side note, if you are using a card that utilizes the annual account fee you must also take that into consideration when marking out your payment plan.

There is no doubt that this form of credit is one of the most convenient ways to borrow, but it can come at a high cost.  If you overstep your boundaries and spend too much you may be looking at an unforgiving pit of minimum payments that barely cover the monthly interest rates. Trust me, this is not a good position to be in.

Another trick used by credit card companies to keep you trapped is their minimum payment.  As you pay off more and more of your debt the minimum payment is going to be reduced.  This may seem like good news, but it is actually the credit card company’s way to keep you in their clutches a little longer, squeezing more money out of you the entire time.  One way to avoid this vicious cycle is to continue to pay more than the required minimum when attempting to pay off an open-ended credit account.

While this is perhaps the most convenient form of debt, it has the potential to be very dangerous.  When used correctly it can be a very powerful ally, but when abused it can lead to frustration and financial nightmares for years to come.  If you are seeking a revolving credit account be wary, it can be your best friend or your harshest enemy, so spend wisely!