Plot a path to turn red into black
Setting goals: Zoe Lamont, founder of the 10thousandgirl campaign. Photo: Elesa Lee
When you're slogging your way out of credit-card debt, the biggest challenge can come from finding a strategy that suits you and sticking to it.
For Karyn Bosnak, a TV producer who racked up $20,000 in credit-card debt when she moved to New York and embraced the Big Apple lifestyle, the way out of debt lay in going public. Very public.
Facing up to her debts in 2002, she set up a website where she not only wrote about her journey out of debt, she asked readers to send money to help her get out of debt faster. Amazingly, they did.
As her subsequent book, Save Karyn - One Shopaholic's Journey to Debt and Back, details, more than half her debt - $13,323.08 - was paid off through donations.
For the rest, she had to fall back on selling items on eBay and cutting back her expenses.
Admittedly, not everyone can crowd-fund their way out of credit-card debt.
Most of us have to rely on reinventing our budget and getting tough on spending habits.
Zoe Lamont, founder of the 10thousandgirl financial literacy campaign, says the starting point is to get a clear picture of your debts and settle on a repayment strategy.
''This decreases the overwhelming feeling often associated with debt and allows people to move forward step by step rather than sticking their head in the sand and letting debt compound around them.''
Then, break the strategy down into baby steps and take a couple of small actions immediately to give your confidence a boost.
It worked for Alex Wilson, founder of savingsguide.com.au, when he started paying off $25,000 of credit-card debts.
Conventional financial wisdom says people should tackle the debt with the highest interest rate first, but Wilson chose instead to get quick runs on the board by paying off his smallest debt first.
Then, with his motivation humming nicely, he was able to keep forging ahead with paying off his debts by turning it into a game.
''When we are working to establish habits, starting is always the hardest,'' Lamont says.
Setting up systems such as an automatic direct debit from your salary can be a great kickstart to a debt-repayment plan.
So can enlisting the help of a cheer squad to hold you accountable when your motivation wanes.
''It's OK to get help and, actually, it can make the process a bit more fun when you involve other people you trust,'' Lamont says.
When Sydneysider Nicole Cannon got serious about digging her way out of $37,000 of credit-card debt, she was careful not to kid herself about the benefits of a balance-transfer deal.
A typical balance-transfer offer allows debts to be shifted to a new credit card that has a far lower interest rate for a specific period, then reverts to a higher interest rate.
Someone paying off large debts might shift the remaining debt to another balance-transfer card as soon as the low interest period runs out. While the strategy has its advantages, it was one Cannon easily dismissed after attending a 10thousandgirl workshop in 2011.
The last thing she wanted was the temptation of another credit card. Her debts, spread across two credit cards and a store card, had mounted quickly when she rebranded her business, Pink Finance, back in 2009.
Time was another consideration. A strategy that relied on research-ing and applying for another balance-transfer card in six or nine months wasn't likely to work, and with her sights set on buying property, she didn't want multiple applications for credit littering her credit file.
Instead, the 34-year-old consolidated her debts into a personal loan and cancelled her cards. ''I just wanted that stability [of knowing] that if I made the minimum monthly repayment for the next five years then I would be able to pay off that loan,'' she says.
''Yes, I was paying a higher interest rate for that but long-term it was going to be better for me.''
Another plus? The personal loan allowed extra repayments.
Already used to paying $1600 a month off her card debts, she threw the same amount onto her loan, even though the repayment was only $950. Watching how those extra repayments reduced the life of her loan spurred her on.
''Any extra cash that I had went on to that personal loan so that I could reduce the interest.''
But like any other financial goal, when you're paying off debt there can be setbacks from unexpected expenses or the pull of other people's expectations.
If that happens, the trick is to go back to identifying two actions you can take to rebuild momentum, Lamont says.
Cannon's debt was disappearing when along came three weddings and a work trip, all of them overseas. She drew on her extra loan repayments to fund the trips.
It reinforced for her how good it felt to pay cash for the trips rather than falling back on a credit card.
''I paid for all of those four trips in cash, so I see that as a huge achievement. I had an incredible 2012 where I went overseas and saw amazing things and I'm not in any further debt.''
Cannon's debts are now down to $24,000 and she has had her offer for a property accepted. ''I've learnt now to live within my means and I can't see myself ever going back to having a credit card,'' she says.