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It took nearly three years for Lynnette Khalfani-Cox, The Money Coach® and author of "Zero Debt: The Ultimate Guide to Financial Freedom," to pay off $100,000 in credit card debt.
But in the process of her six-figure debt payoff journey, Khalfani-Cox gained more than just financial freedom. She also adopted some new money habits to maintain what she calls a "Zero Debt mindset."
Before she buys stuff or makes any new purchases, these are the two questions she asks herself to be a more disciplined spender and avoid debt. "Just asking myself these kinds of questions helps me to make better financial choices," Khalfani-Cox tells CNBC Select.
- Should I put this on a card or should I just use cash to buy it?
- If I'm going to charge something, do I have the ability to pay the balance off in full or in a rapid time frame?
Below, we break down how each of these questions could help not just Khalfani-Cox, but everyone to stay away from credit card debt.
The decision to use cash or credit for your everyday purchases is a personal choice. Some people may like that having to use physical dollar bills helps control their spending, while others are happy to use credit knowing that they won't spend above their means.
This is an important question to ask yourself because it makes you stop and think about how you manage money. For Khalfani-Cox, it helps remind her of how she used credit when she was in debt.
"I used credit as a crutch and as a lifestyle tool," she says. "When I didn't have money for something, I whipped out a credit card."
As long as you're thoughtful and smart about how you use them, credit cards can be financial tools for your wallet. For example, using a rewards credit card can earn you points and miles, while a flat-rate cash-back card can help put money back in your pocket every time you make a purchase. Some even encourage paying your bills on time.
Check out the Citi® Double Cash Card, which lets cardholders earn 2% cash back: 1% on all purchases and an additional 1% after they pay their credit card bill.
2. If I'm going to charge something, do I have the ability to pay the balance off in full or within a rapid time frame?
Second to paying your credit card bills on time is making sure you pay them off in full. Carrying a balance month to month does not help your credit score (a common myth), and it gets expensive. With most credit card issuers charging daily interest after your billing cycle ends, your balance increases steadily each day it goes unpaid — causing it to quickly skyrocket.
This is a question every credit cardholder should ask themselves. For Khalfani-Cox, who knew that excessive spending was the "true pain point" that got her into high debt before, she today adheres to certain spending strategies. For example, when traveling she makes sure she has a budget upfront that she know she can afford. (Here's how to create a budget in five steps.)
To make her way out of debt, Khalfani-Cox says an important step was doubling and tripling her credit card payments. Before she got aggressive about her payoff plan, she was only making minimum payments each month.
"That was a debt trap and part of why I stayed in debt so long," she says. "Once I started making two and three times the minimum payments required, I was able to more quickly chip away at those bills." Paying more than the minimum allows you to actually make a dent in your principal balance in addition to the interest accrued.
If you don't think you can immediately pay off a certain expense that you are anticipating making, consider using a credit card that offers an introductory period of zero interest on new purchases. To get the most use out of these types of credit cards, you would want to make sure that after the introductory period you can pay your purchases off in full so you don't end up accruing interest. Zero-interest cards usually require good to excellent credit scores.
Check out the U.S. Bank Visa® Platinum Card, which offers 0% interest for the first 20 billing cycles on both balance transfers and purchases (after, 14.49% - 24.49% variable APR). Balances must be transferred within 60 days from account opening.