Note: This article is a guest post contributed by Taylor Schulte, CFP.
Debt is an ugly four-letter word. It comes in all shapes and sizes, and generally includes mortgages, auto and student loans, credits cards, and more. In fact, as of December 2015, an average American household was estimated to have $130,922 in debt, with $15,762 of that number belonging to credit cards.
Even more staggering is the $733 billion of credit card debt owned by U.S. consumers coming into this year.
As business credit card debt is considered to be costly (and one of the worst kinds of debt), it’s often reviewed first when putting together a financial plan. One overlooked question, however, is what comes next.
What if you stuck to your plan and got those pesky credit card balances down to zero? What steps can you take to ensure you don’t rack up those bills again?
Below are my top three recommendations for keeping those business credit card balances in check now that you’ve greatly reduced or eliminated your debt.
Cut Up Those Credit Cards. As cliché as that image has become, this is an essential first step. There are a lot of psychological factors that go into acquiring debt, and if you were prone to racking up debt in the past, chances are you are prone to doing it again. Don’t take the risk. Cut up your credit cards and rely on a bank debit card instead. This will ensure you only spend the money you actually have—not the funds your credit card company generously lets you ‘borrow.’
Check Yourself and Remain Accountable. Accountability is key when it comes to keeping business credit card balances in check. At a minimum, schedule an annual financial check-up to build in that accountability. This can be done in a variety of ways—be it with a family member, colleague, a spouse, financial planner, or even yourself. Knowing that this event is on the calendar will hopefully provide you with the needed motivation to stay on track.
Utilize Tech Tools. With the advent of technology, mobility and online resources, it’s now possible to find solutions to virtually anything using tech tools. Why not leverage technology to get a comprehensive view of your financial well-being? You can do this with the help of a financial professional or even complimentary sites, such as mint.com. Use these tools to track your spending or set budgets, and make it a habit to login in once per week to ensure consistency and results.
While there are plenty of reasons people fall into debt, more often than not, debt begins to spiral out of control because people neglect their business finances. They are afraid to look, and by the time they get the courage—it’s too late. Be proactive, take control and use the necessary tools to stay on track of your debt. The less you owe, the more you own, and the better chances of a successful financial life.
About the Author
Taylor Schulte, CFP® is the founder and CEO of Define Financial, responsible for the company’s vision, strategy and execution. Schulte is passionate about helping clients create successful financial plans, accumulate wealth and plan for retirement. While he works with a range of individuals and small businesses, Schulte has a keen understanding of young professionals’ financial needs and infuses industry-leading technology into his practice to optimize client results and experiences.
He has been featured in a number of publications, including The Wall Street Journal, Main Street, Financial Planning, Financial Advisor, San Diego Business Journal and San Diego Magazine. He is also a regular contributor to Kiplinger and San Diego Downtown News.