Before this change we were living month to month swimming in revolving credit circles, making payments that seemed to get nothing done towards the balance. Our interest rates and fees were soaring and no matter what we did, we couldn’t get out from under it.
In this post, I want to tips to reduce stress and live a more fulfilling life. Since we did these few steps, we were finally able to do big things that we’ve been wanting to do but couldn’t get the financing for. I’m proud to say, I have good credit for the very first time in my life!
Step One- Make a list and check it twice (or 100 times)
This is a huge step in the right direction. To me, it was the big one. We had a HUGE list. I went through all of our monthly bills and made a list including each bill, due date, available credit, and balance due. This was the hardest and most time-consuming step. Between my husband and I, we had managed to collect 30+ monthly bills including house, utilities, car, insurances (personal and auto), subscriptions. I listed them in a way that was easy for me to understand. I started with the most important to us, that’s the house and vehicle payments. This is an example of what your bills list could look like:
This is a huge step in the right direction. To me, it was the big one. We had a HUGE list. I went through all of our monthly bills and made a list including each bill, due date, available credit, and balance due. This was the hardest and most time-consuming step. Between my husband and I, we had managed to collect 30+ monthly bills including house, utilities, car, insurances (personal and auto), subscriptions. I listed them in a way that was easy for me to understand. I started with the most important to us, that’s the house and vehicle payments. This is an example of what your bills list could look like:
- Rent/mortgage
- Electric
- water/garbage/sewer
- Home phone/cable/internet
- Car note
- Car insurance
- Cell phones
- Personal loans
- Credit cards
- Subscriptions
The first thing I wanted to do was eliminate any unnecessary bills. While doing this part, do not judge yourself harshly. Nothing in the world will bring back the money you spent on automatic subscription payments. Eliminate the unnecessary ones and move on.
I went through 3 of my bank statements and realized I had more than I remembered off the top of my head. Subscriptions were the sneakiest ones for me. All I have to say is stay away from them if you can or set a reminder for them. Check your bank statements for any automatic payments that you may have forgotten about.
I didn’t realize we had so many monthly subscriptions until I made the list. You can get a subscription to anything these days. Shopping sites, streaming services, business and personal accounts, clothing sites, and more! Check out my mistakes so you can make sure you don’t do the same.
One accidental account I had was one I didn't even realize I had. I ordered my mother-in-law a Christmas gift online and had it delivered to her house using a delivery service. One of the boxes I checked was to continue the delivery service. I didn’t realize it until I had an over drawn credit card. I was paying for a delivery service for about 18 months that I never used after her Christmas present was delivered. I never even shopped at the store that the delivery service was for. It's so easy to accidentally purchase something on a continuing basis.
I had 3 streaming services on top of paying for a monthly satellite bill. I think the streaming services all started as free trials for specific viewing events and I have forgotten about them every time until the bill is paid. Another one, razor refills. 2 monthly subscriptions to razor companies! Both of them started as a gift for my husband that I didn’t cancel. I had a few business-related expenses like my editing software and office assistant subscriptions, one of them was to the same company! One through my personal email and the other through my business email. I didn’t realize I had them both until I switched financial institutions and ended up with 2 bills to the same company, on automatic payments, twice a month. YIKES!
These debits can sneak up on you every single time! This is what a list of subscription accounts can look like and not even realize it until after the bill is paid. Then the pain of waiting until you get back to your computer to log in and cancel the subscription. Then the certainty of forgetting again until the next month, after it’s already been paid, again. Don’t be an Amy, pay attention to the monthly subscriptions.
- $24.99
- $24.99
- $13.99
- $9.99
- $15.99
- $12.99
- $18.25
- $13.38
Those little bills add up! Especially when you aren’t even using those services. Take the time to go into the account and cancel the subscriptions you don’t use. Set a reminder on your phone so you can know before the bill comes due.
So, summing it up:
After your list of monthly expenses is made and separated to keep and cancel, you will know about how much you are working with every month. Your "keep list" will have your main living expenses and revolving credit payments. Your basic bills (house, phones, car) will be a constant. Your "cancel list" will be the unnecessary bills that you don't need or services you no longer use. Your revolving credit can and will go away with focus and consistency.
This is your foundation. Stick to it.
Step Two- Debt Consolidation
Debt consolidation can be scary, especially if you have several small bills, a few larger bills, and you worry if a large payment will be feasible. We had heard so many things about the negative impact of debt consolidation and we’re afraid that it would knock our credit score down or would be too big of a payment to afford. There are several ways to go about debt consolidation. Learn More.
We personally chose to get a low-interest personal loan to cover the high balance, high-interest rate, credit card payments. That right there was the biggest improvement we made we made and our finances that made the biggest change. I can break down the math for my personal experience so you can see how we did it.
On our 6 large credit cards, we had made it to 26% interest. Just paying our minimum monthly payments on those 6 cards only was over $450 every month (average of $75 per month each). Our balances weren’t coming down. On one of them, the balance and interest was so high, the balance was still going up.
Our personal loan we secured was at a 14% interest rate, bringing all of those payments down to $0, and our loan payment is only $340 a month. The loan payment is going down every single month and I can see a difference, it’s great!
So far in this post, my unnecessary subscriptions and 6 large credit cards were $584.57. Keep in mind that was all unnecessary subscription services I didn't use anymore and minimum payments on my credit cards.
I am already saving about $245 in reoccurring payments and unnecessary subscriptions I wasn’t using, every single month. That's not even counting the amount I will save in the long run by coming down over 10% on interest. Since my personal loan is an installment loan, I can see the balance coming down with every payment and no more increases every month on added interest.
Step Three- Be responsible and Mindful.
With the extra cash flow in the budget, it’s very easy to be less strict on yourself. BUT keep the focus and set goals for yourself. Make sure you have short and long-term goals. It's nice to have something to look forward to. You can see the difference in your score by 3 months of consolidation. Our scores had jumped considerably.
What I recommend, taking a portion of the extra cash and picking a credit card to pay off. Pay extra on that bill every month. If you have low-balance credit cards, you can easily get them paid off with a few extra payments. Do that and keep working your way up the list. You will not be sorry.
In one year, I have all but 2 credit cards paid completely off. Those are still on the list. My credit score is in the GOOD range, and my monthly reoccurring bills are at a manageable range, and I am getting higher balance-lower interest rate offers every week. Be careful with inquiries though. They stay on your credit report for 2 years and will affect how lenders look at you. Too many inquiries look like you are unable to manage your credit but, you can and you are!
In addition to the three tips above, don’t close too many accounts. If you are getting a monthly service fee for having the card and it’s a low balance, get rid of it. Just keep in mind, all of those low balances are adding up your available credit. For the first time in my life, I have $9,000 In available credit!!!!
If you have any questions about how I got my credit up and my debt to income ratio down, please feel free to email me directly. We can all have less stress financially!
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