Money 101: Get Out Of Debt Now!

One Venti latte five mornings a week. You could probably pay for your caffeine addiction with cash, but who carries around stacks of green besides strippers and Lil Wayne? Plastic is so much more convenient.

A couple coffees probably won’t send you to the poorhouse, but are you swiping the plastic for groceries? Rent? Routine living expenses?

If so, you’re not alone, says Clarky Davis, The Debt Diva, author of The Debt Diva’s Financial Guide. Davis says most Gen Y-ers have more than three credit cards, and one-fifth of them owe more than $10,000. Of those households in the U.S. with credit card debt, the average debt is $16,007. So, when are you in over your head? If you are struggling to meet your minimum payment, your phone is blowing up with collections calls, or you cannot pay off your entire credit card balance in three months … the Debt Diva is talking to YOU.

Debt Diva Clarky Davis offers the following simple tips on how to get rid of your debt once and for all.

1. Face the ugly truth. Mom, Dad, a sugar daddy, or the lottery are not going to save you. It’s time to educate yourself on your debt. “Tally up those credit card bills, find out what interest rates you’re being charged, and pull your credit report,” Davis says. (For a free credit report, go to the FTC website.) What’s the damage? Sit. Swallow. And then deal.

2. Create your attack plan. Prioritize paying off credit cards by paying the one with the highest interest rate first, says the Debt Diva. Try to at least double your minimum monthly payment. While you’re focusing on the card with the highest interest rate, don’t ignore the other cards. Continue to pay the minimum payment on each card while you try to eliminate one debt at a time.

3. Stop the madness! Put a fork in credit card spending — you’re done. Kaput! Finito. The Debt Diva says to set your monthly payment as high as you can, while still leaving breathing room at the end of the month. The last thing you want to do is put groceries on plastic because your payments are too high.

4. Restrain yourself! Payments not making a dent in that credit card balance? You have a spending problem. The Debt Diva recommends easy substitutions for trimming your budget so you can increase that monthly payment. Do you really use your $40-per-month gym membership? Can you live without the premium cable package? Can you join Netflix for a fraction of the cost of going to the theater? “You probably won’t even miss these things after a few months,” says Davis. “And you can always add them back after you get control of your debt.”

5. Automate, baby. The Debt Diva recommends online bill pay for all credit cards. “One payment that is 30 days late stays on your credit report for seven years,” warns Davis. She says consolidate debt onto one credit card, but only if an existing card offers to accept transferred balances at a reduced interest rate. “Never open a new card to transfer a balance,” she says, “because opening a new line of credit will negatively affect your credit score.”

6. Alert your inner skeptic. Do your research before hiring a credit counseling service to help you manage. “Any company that claims to repair your credit and wipe away your debt should raise a red flag,” says Davis. “No one can repair your credit but yourself.” What a legitimate company can do is stop the collections calls, reduce your interest rate and maybe help eliminate late fees. The Debt Diva says never sign a contract with a credit counseling service unless they are licensed in your state and have an A+ or A rating with the Better Business Bureau.

The Money section and all articles within it are sponsored by Free Credit Report; however, the articles are all independently produced by The Frisky and the opinions and views expressed by the writers and experts are their own.