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Catalina Franco-Cicero joined Tobias Financial Advisors in October 2017 as a Financial Advisor.  In this role, Catalina focuses on co-creating possibilities along with her clients by matching their values with their goals. Passionate about debt reduction and healthy expense management, we’ve asked Catalina to share her knowledge and experience with our readers. Read her full bio.

A credit card can be a powerful financial tool. In the United States, having one is more or less essential to demonstrate financial responsibility and build credit. The convenience of credit cards in times of hardship, or even simple indulgence, can quickly reveal how easy it is to rack up debt. Credit card debt affects many people, regardless of their background or income. According to NerdWallet in 2017, the average American family owes approximately $15,654 in credit card debt. At any amount, carrying too much credit card debt can get in the way of other personal or financial goals. Renting, applying for a home loan, even upgrading your cell phone are just a few things that are ultimately impacted by the debt you carry.

During my years of working as a Financial Advisor, I have partnered with my fair share of clients to successfully reduce their debt and improve their cash-flow management. Confidently, there are a few key things that I can suggest to anyone who is paying down their credit card debt:

Track your spending.

Start a spreadsheet or leverage the use of an expense tracking app like Quickbooks or Mint.com to help you track where your money is going every month and how your expenses are adding to your overall debt. Factor in recurring monthly expenses as well as seasonal expenses like holiday gifts, insurance renewals, and travel. This will help you identify areas that you can trim and cut back on as well as help you build out a budget for expenses that come from a true need like health care, groceries, or gas.  Doing this can also help you plan for and prepare for larger recurring expenses that come along once a year, like car insurance, property taxes and holiday gifts.  There are plenty of online services that are free to use and can help with budgeting and cash flow forecasting.  

Simplify your debt with a better rate.

If you find yourself with too many credit cards to keep track of, it may be worth investigating your options to consolidate your debt. Not only will this minimize the number of monthly payments you make, there could be options that help you reduce the interest rate on your overall balance. NerdWallet, WalletHub, and Bankrate are all resources that can help you identify cards with the lowest interest rates. Transferring your balance to a card with a 5%-10% lower rate can save hundreds and make it easier to pay off the outstanding balance. Caution: Many will charge a flat fee and/or a higher interest rate on balance transfers, so read the fine print. There are also personal loans that may offer lower interest rates but you’ll still need to be cautious here and make sure you minimize the number of credit cards you have once they are paid off. Minimizing the temptation for the future will help you maintain a healthier credit profile.

Always pay more than the minimum.

It’s a big temptation for most to simply pay the minimum every month but if true debt reduction is your goal, commit to paying more than the minimum payment. Even just a small amount over the minimum payment can help you save thousands of dollars in the long run.

Think before you spend.

Whether you’re pulling out plastic or cash, give your purchase a second thought: “Am I willing to buy this even if it means I have to work for another 3 months to pay this off and pay 20% + interest?” Another good question: “How many hours do I have to work to buy this? Is it worth it?” Ultimately you’re not only spending your money, you’re also spending the time it took to make that money. Use that gut-check to help you build better spending habits.

Find “extra” cash.

In the words of Marie Forleo, “Never say no to honest money.” Consider a short-term part-time job, a garage sale, or cutting back 2 or 3 meals-out each month. Add your additional earnings and savings on top of your monthly payments to start eliminating your debt.

Know your plan and stick to it.

Create check points for yourself each month to show your progress as well as revitalize your goals. This may be as simple as wrapping your credit cards with reminders of what your future holds when you’re debt-free or putting your credit cards in the freezer and only using your debit card. You may need to reevaluate your spending habits a second or third time for additional expense trimming. What seem like necessities in the beginning may not be as important once you truly understand your expense needs.

Envision the payoff.

Last but not least, visualize your debt-free future. Create a vision board or a simple list of goals that will be positively affected by you overcoming your credit card debt. We’re only human, which means it’s important to remind ourselves why becoming debt-free is going to be good for us. Take the time to know your motivation for eliminating your credit card debt. Enlist a close friend or family member to be part of our accountability coach. Checking in with this person on a scheduled basis may help give you the encouragement you need to stay on track. These goals can help keep the fire going when you have days of weakness or weeks where you can’t seem to catch a break. Knowing that there will be a bigger and better pay-off of well-being, success, and independence after that last payment is made can be the spark you need.

Your Financial Advisor,
Catalina Franco-Cicero, MS, CFP®