Step 04: Pay off your Credit Cards and Store Cards.


One of the most important things to get rid of first on your road to financial freedom is debt.  Debt is bad – it incurs high interest rates, in access of 20%.  If you have a lump sum of money in a 32 day notice account, the banks only give you between 4 – 6 % interest on your money!  What?  Yes, only 4 – 6% interest BUT if you owe them money damn, they charge you around 20%.

This 20% interest is what you need to get rid of as soon as soonest.  Credit cards, store accounts are your sources of 20% interests.  Get rid of them.  Or rather, why not pay them up and start using them intelligently.  Just so you know, if you have a credit card owing R30 000, with an interest rate in access of 20%, it will take you around 5 years to pay it off if you only pay the monthly minimum required amounts.  (My disclaimer on this statement is that i have not personally calculated it but hope to and will share my findings.)  5 years is a pretty long time to be paying off a credit card!


So begin today, target your smallest debts or biggest debts or the ones that attract the highest interest first and pay them off while still paying the minimums on the other debts.  Paying it off does not mean forgetting the others.  It means paying maybe the minimum required amounts in the another accounts while paying more in the targeted account in order to pay it off more quickly.  Never neglect any debt, try make sure you pay a little to each.

Have a sit down, put your strategy in place.  Which debt will you target first?  Your largest or your smallest?  I recommend you start with the smallest so that when you complete paying them off you can celebrate these small victories.  Celebrating small victories goes a long way in keeping you motivated on this long journey!  Now that you have decided on which account to finish first, let’s ACT on it.  One small payment at a time goes a long way.

Earlier one, i mentioned that why not pay up your credit cards and store cards and start using them intelligently, financially – whatever that means.  Intelligently?  How?  I like giving suggestions so here goes another one.  How about you use your paid up credit card as a budget tool as in Ditch the garage card (click on link) .   Also pay up your store accounts and have a budget for your store accounts whereby you pay a monthly amount into the store accounts irrespective of whether you owe or not.  These payments should be from you monthly clothing amount on your budget.  Try it, see how it works for you.  Need to change the concept?  Why not, go ahead, change and readjust or realign your goals to suit you and your lifestyle.  Remember nothing is cast in stone and also whats good for someone is probably not good for another.  Find and define your own journey.

find your own journey …

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