What financial systems and habits can you use to get rid of your credit card debt?

One area of my life that has seen significant improvement from relying on systems and habits techniques is money.  When I was in college I, like most college students, didn’t have a lot of money and quickly found out how easy it was to get a credit card.  In fact the credit card companies would have tables set up at the student center and would stop students and try to convince them to apply for their credit card to get a free gift such as a shirt, coffee mug or other item. 

I was a little naïve at the time.  I never thought much about why so many credit card companies were there and why they badly wanted to give me one.  I just thought this could help me while in school to afford the things that I need.

While in college I didn’t completely start relying on credit cards and was able to maintain relatively low or no balance from month to month.  But I started to develop the habit of putting everything on the credit card and then paying that off rather than proactively budgeting and making spending decisions based on how much money I had. 

After college I started a business, which required me to utilize my credit cards even more.  I would purchase equipment and supplies, knowing that I could write them off. 

But what started as a method of payment quickly turned into a method of collecting debt.  Putting something on the credit card was easy and I would always find a way to justify it.  I was reading Robert Kiyosaki at the time and rationalized adding to my credit card debt as investing in my business.  I thought it was good debt versus bad debt.

Finally I picked up some extra work and my income increased significantly and became a little more stable.  But instead of using this increase in revenue to pay off debt, I found more ways to “invest” it and became much more careless in what I purchased.  I was shocked to realize after a few months I was actually worse off than I was before taking on the project!

This was my pivot point.  At this point I finally realized that I needed to make better choices with my money.  The next several months I would scrutinize every purchase.  I started to make a little progress but now had a lot of stress and anxiety around my finances. 

I started to experiment with different strategies and I finally found one that worked for me.  I created an excel spreadsheet with various columns.  Each column represented a budget.  I would put a little money in each column for rent, bills, savings, charity, entertainment, etc. 

I didn’t realize at the time but I was creating a personal budget.  This simple change made an immediate impact. 

I was now forced to track every dollar I spent and attribute it to a category.  I could see when I was under or over funding a category.  I also could better understand just how much money I needed every month to survive.  It gave me a direct look at my spending habits rather than just looking at a few large purchases. 

Over the years this spreadsheet has advanced but I still rely on a very simple document to track all of my finances (if you are interested in a copy of it please send me an email and I would be happy to send it to you). 

This allowed me to better understand my finances and then put a strategic plan in place.  I would focus on having enough money in each category for the month and a small amount left in savings in case of emergencies.  With every extra dollar, I would pay off one credit card at a time.  I would pay the minimums on every other one.  One by one I was able to eliminate that debt.  Plus I wasn’t adding more debt to it.  I finally was in control of my spending. 

The funny thing is that years after I paid off my credit card debt I read Dave Ramsey’s book, Total Money Makeover.   I was amazed at how close my system was to Dave’s recommended system.  There were some slight differences but the principles remained the same. 

I felt a little foolish because after college my father and brother both recommended I read Dave Ramsey’s book as well as Thomas Stanley’s book, Millionaire Next Door.  Either book, if read and applied, would have saved me years of financial struggle.  When I finally did get around to reading them, I found that I had learned the hard way the lessons that I could have gleamed from their work. 

But this also helped me realize the power of systems and habits from a financial perspective.  Our systems and habits will determine our financial situation in life much more than how much we make or what investments pay off. 

There are numerous financial books that advocate their own money habits and budgeting systems and the key is to read enough to find what works for you.  If Dave Ramsey and Thomas Stanley are too conservative and you want to take a little more risk, read Robert Kiyosaki (Rich Dad, Poor Dad) or MJ DeMarco (The Millionaire Fastlane).  If you do not like to read a lot then a great starting point is George Clason and his book The Richest Man in Babylon.   It is a short book but packed with insight provided in a storytelling method to make it easier to read and understand.

I once heard that Zig Ziglar said, “It doesn’t matter which system you use, it just matters that you use a system.”  He was referencing sales systems but it also applies here. 

The reality is that a system of habits will develop regardless.  But in order to make sure the system is the best for you and the most helpful, you have to be aware of the system and have a part in designing it.  Otherwise a series of bad financial designs could create a new habit that drags you into struggle and debt.  I encourage you, if you haven’t addressed your financial system, start to read the various authors who talk about budgeting and finances and start to take control of your financial situation!