Here's a suggestion. I want to give you a $20 bill, and in return you will give me back a $100 bill. Appear fair? If you have a credit card, you've been doing this all along and I'm going to show you how to stop.
Credit cards can be a powerful money management tool. It can allow you to use your finances to accomplish things you otherwise couldn't without waiting for the money in your savings account to come in. On the other hand, credit cards can also become a great evil that destroys lives. It's convenient access to money you don't have, and it allows for purchasing decisions you may have to live with for many years after the purchased item is thrown away.
So what do you do if you find yourself in a deep debt position and no obvious way to pay it all off? What if you find that you're even sinking into debt trying to pay off multiple high-interest credit cards and getting nowhere??
A few years ago, I described how to focus your credit card payment using Excel. Create a personal budget in Excel in 4 easy steps. Create a personal budget in Excel in 4 easy steps. Do you have so much debt that it will take decades to pay off? It's time to create a budget and apply a few Excel tricks that can help you pay off your debt faster. Read More efforts to pay off your total debt faster. This is an effective approach to debt management, but it can also be complicated to sort payments based on interest calculations like I described. Wouldn't it be nice to have a tool that does all the work for you, telling you what you should pay first and how much you should pay?
In fact, there is such a tool ReadyForZero, What Tehseen described earlier at MUO ReadyForZero: Helps eliminate your credit card debt ReadyForZero: Helps eliminate your credit card debt Continue reading. It is a tool I recently discovered and realized that it completely automates the Excel system I developed myself a few years ago. I believe it has the potential to save countless people from the overwhelming burden of rolling credit card debt.
Note: ReadyForZero is only in the U.S., but the developers say they have international goals.
Are you ready for zero debt?
In fact, there are two main reasons for extremely high credit card debt. The first is the inability to control your spending within your means. This isn't something an app or website will cure for you, but they can help you manage your spending problems. You know MakeUseOf has always been there to support you – and we've provided plenty of resources to help you keep your spending under control. Keep your spending under control with One Touch Expenser and keep your finances under control with One Touch Expenses for Android These are things we all know we should do, but usually don't because it's just too much hassle. One Touch Expenser… Read More, an Android app that lets you log and manage your spending habits. I have also tested five other Android finance apps. 5 Android finance apps: 5 Saving and managing money with your Android phone 5 Android finance apps: Saving and managing money with your Android phone Read more to see what might help you, too.
Set up your accounts
Once you have your expenses under control, the next thing you need to do is pay off all those crazy debts. Do not get overwhelmed. First visit ReadyForZero.com and start the process by collecting all your debts in one place.
With Ready For Zero you can easily get started. All you have to do is search for the credit card company where you have an account. You will then be given fields in which to enter the login information for this account. Ready For Zero is a safe application. In Times, Market Watch, Inc., Kiplinger and others there is commendable press coverage. It's safe – so add your accounts to it. It's time to take back your financial life, isn't it? Today is the day.
The site provides access to almost every major financial institution you can think of. American Express, Capital One, Discover, HSBC, Wells Fargo – the list continues. You'll be hard-pressed to find a credit card company that isn't covered here. When you successfully add your accounts, the list will show blue "Linked" status on the left side of each account.
After a few minutes, accounts are updated with your details, including your current balances, current interest rates and minimum payments. If the system cannot retrieve your current interest rate for this account, in some cases you will need to complete it manually.
As soon as all your accounts are loaded (which really only takes 10 to 20 minutes, depending on the number of accounts), you can proceed with the next, most important step. That is… create a plan to regain control of your financial life.
Planning for a life without debt
Dream about it. Meditate on it. Imagine this. A life in which you no longer have to make a single debt payment. A life where you can save for a new car in a few months. A life where your only real debt is a mortgage and a car payment (if any). This can be your life – don't doubt it. The first step in this life is to create a plan. Ready For Zero lets you put together the most effective plan.
The first phase shows you where you stand today. Trust me, the numbers are getting scary. You look huge. Not only will you see what you owe today, but you'll also see how much interest you'll pay on that debt if you continue to make only minimum payments, and the total amount you'll end up paying. It's horrible to see – but the first step in destroying this monster is to look it straight in the eye.
Now you've stared down the beast, it's time to take out your sword and make a plan. Clicking on the "let's improve this" button and Ready for Zero will take you to another page that basically asks you how much you're willing to increase your budget to overcome your debt. You can either move the "Monthly Payment" slider to the highest number you can work with each month, or you can set the value "Date Done" slider to a date you really want to be debt free no matter what happens. What goal you set is up to you – it depends on what is more important to you – what will make you stick to your plan.
So if I double my monthly payment, I'll pretty much pay a third less than I did before on the total debt, and I'll cut the term by 90 years before the debt is paid off . Paying the minimum is obviously a very bad idea.
Focus payments where it will help the most
Paying off multiple credit cards becomes difficult. With so many different interest rates, it's not always clear how much more impact a payment will have. ReadyForZero looks at all your accounts and feeds you the amount of payments you should make on each account. It creates a "target account" where most of your monthly payments will go. This will clear the highest interest card and allow you to apply your monthly payments to a new target account.
This is basically referred to as your "zero plan". It's a path to a new life without debt. On the right side of the Plan page, you'll see your statistics – the total monthly payment you've committed to, the date you're guaranteed to be debt-free, and the amount you've paid.
Track your progress
The account also gives you a "progress" section that shows a breakdown for each account. There is a certain level of satisfaction when you see the progress bar slide across each account, and then the wonderful golden highlight when you reach your goal with each account.
There's also a "progress on your plan" chart that gives a prediction of how you'll do from now until your target date if you keep your payment promise. Over time, a golden line shows the progress you've made and where you are on this predicted path to zero debt.
Making payments and next steps
When you click on the Payments menu, you'll see a breakdown of how ReadyForZero has recommended your payment breakdown for each credit card or loan account.
You can make these payments manually as scheduled or, for a small monthly fee, update your ReadyForZero account to schedule payments electronically directly from the site. This is probably the easiest way to ensure you maintain your plan, as you don't have to worry about forgetting to make payments (and incurring fees later)..
Sometimes a payment plan isn't enough. If you're far enough down with debt, some additional steps like Debt Consolidation can be useful. ReadyForZero even has a debt consolidation tool that recommends how much you should apply for when you get a debt consolidation loan, and which accounts you should pay off immediately with the loan.
ReadyForZero also gives you really helpful tips on how to easily organize your financial information and data. Plus, you'll get some insightful tips on changing your environment so you don't have to deal with the possible triggers you've spent so much up to this point in your life. You can also stay sharp with the currently read-only iOS app – you can see all the information and your progress, but you can't change it through the app.
A comprehensive financial management tool it is not. ReadyForZero focuses on the area of your budget that's dragging you down the most – your debt. It's all about taking inventory of the problems there and making the necessary changes to overcome that burden and regain control of your life. The sooner you sign up and create your plan on the website, the closer you are to a completely debt-free life.