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Your Credit Cards Are Paid Off, Now How Do You Stay Out of Debt?

Image: Freedigitalphotos.net

Image: Freedigitalphotos.net

One of the fun parts of having a blog is being able to see the search terms that people use to find whatever it is they are looking for. Some of them are quite comical. My two recent favorites have been Wow, I paid off my cat and Do snakes smell like burnt rubber. Why on earth those landed here, I’ll never know, but I do know that by and large my biggest search term is related to paying off credit card debt. My most popular post is my story of paying off over $30,000 in credit card debt. Obviously, there are lots of folks out there who are struggling to pay off their credit cards. I think there are tons of resources to help you with that plan, but how do you stay out of debt once you have paid it off?

Shhhh….

I have another secret confession. The amount of debt we paid off over the past two years is not cumulative. There were two other times in years past when we paid off our credit cards. Once, we paid off $8,000, and another time, it was $12,000. Early on, we knew credit card debt was not a great habit, but after we paid off our balances on those occasions, we ran them up again. Why can’t people stay out of credit card debt?

I’ve Got All Kinds of Money!

I think when we reach a major goal like paying off credit card debt, it is usually through some struggle and sacrifice. You’ve cut out all unnecessary spending to focus on a goal. After the payment is gone, you suddenly find yourself with more money in your pocket. Advertisers and society try to rope you into spending it. People may tell you to reward yourself, or you only live once.  Almost every business offers financing. How many people do you know who struggle with finances and then go out and buy a new car?

How Do I Stay Out of Debt?

Spending is like any other vice. Maybe there isn’t a surgeon general’s warning at the cash register, but if you think worrying over paying bills doesn’t affect your health, then I’ve got some beach front property in Colorado I want to sell you. If you aren’t ready to change your thinking and habits, you’ll never get out of debt. It’s just like losing weight or quitting smoking, you have to have good reasons and be ready to change. If you do it because someone told you to or because you think it’s temporary, you’ll never succeed.

Make Sure You’re on the Same Page as Your Partner- If you’re in a relationship, you don’t have to agree on everything, but you need to have the same basic goals about money. Glen at Monster Piggy Bank mentioned a couple who each spend money as fast as they can so the other one can’t get to it. It reminds me of the circus act where the guy has multiple plates spinning, and it gets harder and harder to keep them all in motion. This lifestyle might work when the money is rolling in, but if it stops, all the spinning plates come tumbling down. If you and  your significant other are never going to be on the same page, it might be best to cut your losses.

Surround Yourself with Like Minded People- Sadly, your friends and family might not understand or support your quest to be debt free. They might even be jealous if they have debt problems themselves. It’s much easier to knock someone off their pedestal than climb up to join them. Trying to quit drinking while hanging out at the bar makes it that much harder to stay sober. Likewise, if you continue to hang out with your friends who continue to spend money, you will be tempted to pull out the credit card.  If you can’t find people who share your ideas, look online. I’ve been thankful to find a great community of financially savvy people who are striving for similar goals.

Follow the Golden Financial Rules-  Really, they work for any income and any amount of debt. Some people might need longer than others, but if you follow a few simple rules, it is possible to stay debt free.

  • Set up a budget by tracking your spending,
  • Spend less than you earn.
  • Evaluate every purchase as a want versus a need, and don’t buy wants unless they add value to your life. If you lack will power, stay away from the stores or don’t look online.
  • Start saving for emergencies so you won’t have to use credit if something goes wrong.

While these rules are simple, they do involve some major life changes for lifelong spenders. If you are used to having a new car every three years, you might have to learn to love an older vehicle. If you pay too much in rent, you might have to move. You might have to tell your children that they don’t need the latest gadget. You might not be popular. What you will be is debt free, and that gives you all the choices that making credit card payments never will.

Tell the truth, have you ever paid off your credit cards only to find yourself back in debt? What is the biggest reason people can’t stay out of debt?


About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.

67 comments

  1. I think the main reason is when you see you have a high limit on your card and a $0 balance. Using 5% of that limit feels like it won’t hurt, then it builds up slowly. I would reduce the limit on the card to whatever I spend monthly, to make sure there is no space for charging more.

    • It’s really funny how the credit card companies raise your limit when you get close. We always got letters raising them. I never thought to lower them.

  2. I guess the main benefit of having paid off your credit cards before is that you know how to do it. Some people get so lost and never end up getting ahead.
    Also, thanks for the mention 🙂

  3. I think for me, a big part of not carrying credit card debt can be attributed to the fact that I don’t actually know my credit limits. I don’t look at it was something where I can spend up to $X on this card and up to $Y on this one.

    • Our limits are huge. While we carried lots of debt, we never missed payments, so we great credit scores and lots of credit available. I guess we could cash out and head to Mexico if we wanted. Just kidding!

  4. In order to stay out of credit card debt, I pay off my cards once a week or so to make sure that my spending is lining up with my actual budget. I also don’t buy anything unless I actually have the money to pay for it….crazy, I know.

    • Crazy smart. I never got the multiple payments, but I do now. If you wait until the end of the month, and haven’t tracked anything, the bill might be more than you have. By paying it off right away, it’s like you spent cash.

  5. “If you aren’t ready to change your thinking and habits, you’ll never get out of debt.” You hit the nail of the head there Kim. It’s so true, yet so many fail to see it. My wife and I did have a little bit of credit card debt when we first got married, but paid it off in a few months and vowed to never go back. In terms of why people can’t stay out of debt…I think there are various reasons, but I think it tends to go back to being undisciplined and having the wrong view on money.

  6. I have not been in credit card debt, and I am not fooling myself by saying history = future. As you mentioned, it can be easy to accomplish big personal finance goals like paying off credit card debt just to find yourself in the same situation a ways down the road. I think the biggest reason it’s hard to stay out of it is because if you pay down your debt you do feel a freedom, and because it’s a financial freedom you feel free to spend a bit more.

    • Life is not enjoyable if you sit around hoarding your money and can’t enjoy the things you have, but there is a balance that has to be there. It took me years to discover that. I don’t think you’ll ever go there. Too dang smart.

  7. Kim, This is a great post that highlights something we rarely discuss, personal spending habit’s. I’ve been in situations where I have paid off a credit card only to find a hefty balance on it a year later. I’ve had to sit down and think back, hard, on how I managed to do that. The culprit was typically a cavalier attitude towards spending.

    • Credit cards make it so easy if you don’t keep up with how much your are spending. Instant gratification, whatever you want. It’s all good till the bill comes.

  8. Getting fully or partially out of debt and then getting right back in with new debt is a trap that many people fall victim to. It doesn’t have to be that way. Each and every month you pay down debt you should set a goal that you will never cross that amount again, then work to doing what you need to do to stick with that goal.

    • If you’re mind is not there, it’s very hard. My mantra used to be let’s pay it off so we can buy something else. Now it’s getting to financial independence. Amazing how much more rewarding that goal is.

  9. Oh yes, we are like you: charged them up and paid them off more than once, but never to the amt that we are in now, sad to say. I like to hope we’ve learned our lesson this time, and we are finally sick and tired of being in debt. Great post, Kim.

    • I think you’re done. You sound lots like me when we decided to finally change our lifestyle. It’s like hitting your rock bottom with any vice. I’m never going back.

  10. Wow, I had no idea that this was a problem- that people are tempted to go back into credit card debt after they have paid it off. That gives me a lot more insight into some of the people I know that have problems with debt. I wonder what the psychological reason is for this?

    • I think for many, it’s just the norm and all we know. My parents were never like that, but my husband’s were. We never talked about money, and I had to learn the hard way. I think once you’re in a ton of debt, you kind of feel like, “What’s one more payment?” but it all catches up to you eventually.

  11. During most of our 40 years of marriage we would pay off our credit cards or take out a home equity line of credit only to get back to a situation where we had to borrow again. (We were spending $1.22 for every dollar we made) Six years ago we paid off $150,000 of debt and last December 2012 we paid off the mortgage. Four BIG reasons for not getting back in debt. 1. Cut up our credit cards. 2. Established an Emergency Fund of $2000. 3. Started using the Envelope method 4. Set up a “You know about it” Savings account for those yearly expenses. Now Christmas does not sneak up on us or vacations do not follow us home. Our Story http://www.debtfreesquad.com/about-us/

    • That is a huge achievement and what an inspiration to all those drowning in debt. We have a few years before the mortgage is done, but I bet that will be an amazing feeling.

  12. Yes I have. I think it is a lot like losing weight…you can’t just reach your goal weight and think you are suddenly in the same position as someone who just naturally keeps weight off easily. It takes daily work to maintain this new lifestyle. Once I’ve paid off my debt I’ve gotten lazy and loosened the slack, only to find myself in old patterns. This month is no exception…I need to get back on track. 🙁

    • I think it’s a life long journey and we might go up and down with how well we’re doing. The trick is to know when you’re slacking and get yourself back in gear.

  13. Although paying off debt may seem difficult, the really hard work is changing your spending habits. I think having a budget may help, but being proactive about spending may mean keeping a diary. If you do not change your spending the credit card debt is just the result of it.

    • I think it’s very hard to change, especially if you are used to doing what you want when you want. Sometimes it’s a big disappointment to friends and family, but hopefully people will understand that you are trying for a better life.

  14. I paid off my credit cards twice. Like you, I racked up even more each time. What we are doing with the car loan and what we are planning on doing with the rest of the debt is to keep paying it after it us paid off. But instead of paying somebody else, we are paying ourselves. That way, when we need the money, we don’t have to resort to debt again.

    • I think that’s really the only way to do it. Keep pretending to have a payment until you need to buy a car, and then you won’t have to go into debt.

  15. Luckily, my wife and I have never been in credit card debt, but it seems like if we ever were, and subsequently got out of it, those cards would be cut up. There is no way we’d keep any credit cards if we had a history of ringing them up.

    • Once you change your behavior and don’t ever carry a balance, I think credit cards are very useful. At least for us, we are getting lots of free travel. It’s about time they paid us something instead of the other way around. If you can’t pay off the balance, though, they need to be cut up.

  16. I think paying off credit card debt is like going on a diet. Until you learn and enforce good habits upon yourself, there can be no change.

    • I think it’s exactly like a diet. I never really made that connection, but lifestyle change in either circumstance has to happen or old behaviors will come back at some point.

  17. Budgeting really is the #1 thing we all should do. Sure there are a lot of successes in financial management without a budget but I think common sense is to use one. Would a company or bussiness not use one? Family finances is not that much different. Actually even more dangerous because both owners have full access to it with no safeguards.

    • Maybe we need to elect a CEO or CFO for family finances? Maybe that would make people take it more seriously or maybe they would just give themselves a bonus.

  18. Great post, Kim. Your golden financial rules are spot on! I think one of the reasons people get out of debt to only go back in debt is they haven’t fully changed their spending habits. They got out of debt so they can buy more stuff. Not because they wanted to embrace financial freedom and spend money on the things that truly mattered to them. Until they change their mindset/habits, over time their debt will likely creep back up.

  19. Apparently some folks can’t stay out of debt because they are paying for their cats on installment plans? In all seriousness – no, I haven’t gotten out of debt to run up bills again. I think most folks who do just have trouble changing their ways in the long term..

    • I’m sure there are some sad souls who finance cats and dogs. That’s one thing I’ve never had to worry about. All my pets pretty much found me.

  20. It’s all about the temptation. Once I paid off my cards, I wanted to use my credit cards all over again because I had so much freedom. I have since stopped myself, but still use my cards for every purchase to rack up rewards. I now pay them off every month because I am not spending anything more than I normally would.

    • Yes, I do that too. I will never pay interest to credit cards again, but I’ll use them for regular spending to get cash back or free travel. It’s about time they gave me some money.

  21. Being honest about our shortcoming and weaknesses in spending habits is key.

  22. College was like that; rack up credit card debt, pay it off. Rinse and repeat. Thankfully those days are long gone!

  23. It is very tempting to use credit cards when there isn’t a lot of extra money in your budget and you want something (not need it, but want) Spending is a vice. People have to be very aware of how they spend their money or they will fall back into the debt trap.

  24. Great post, Kim.. Luckily for me, Michelle and I are absolutely on the same page. We both want to indulge a little bit, because we really buckled down for the entire period we were eliminating debt. But we are spending responsibly and doing it with patience, something we never could have done without going through the massive debt reduction exercise and re-education.

  25. I think a lot of people tend to forget unpleasant feelings, and don’t remember how painful or stressful it might have been to be in debt. Plus, if they got out of debt once before, they might feel like they could do it again. Remembering how tough it was – and how great it felt to get out of debt – can be very helpful.

  26. Great post Kim! I believe people don’t stay out of debt because they don’t fully believe in it as a permanent lifestyle. For me, staying out of debt evolved from a conviction deep down in my spirit. It’s a really strong conviction that I choose to follow with all my heart. You could say it’s a passion. And when you believe in staying out of debt that strongly, then the follow through becomes easy.

  27. I paid off over 15k worth of credit card debt many years ago and did the unthinkable thing of charging those darn things right back up. I have made the decision that I no longer want to live in debt and am willing to do what it takes to pay them off.

  28. I’m actually just about to pay off my credit cards, got around $400 left til they are at $0 balance. My plan for not running them back up is taking that line in the budget and putting that amount in my 401k each month. It’ll be done automatically for me so I wont have a chance to spend it. That way i’ll be saving for my future and there won’t be this burning hole in my pocket.

  29. Luckily J and I are generally on the same page when it comes to finances. Believe it or not, I’ve only had my credit card at zero for ONE DAY before I started racking it up again and for over a decade, it’s never been paid off. I cringe thinking about all the interest I am still paying. Once I pay off my credit card debt end of 2013, I vow to stay away from it. For some reason, I’m certain I can do it 🙂

    • It sounds like you have hit your credit card rock bottom. I think once you do that, you won’t go back. It’s just a feeling you have and know you’ll never pay another penny in interest.

  30. Being on the same page as your partner is so important. I’m lucky enough to run The Outlier Model with my partner, CF, so we rarely disagree on money. When we’re out of debt completely, we won’t go back into debt for sure.

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