I have 3 credit cards and my total monthly bill is 65,000-80,000. My in-hand salary is 70,000. I am now unable to get out of the debt trap as I keep rotating my cards for monthly expenses and pay credit card bills with my entire salary. I always pay the full amount and not just the minimum amount payable and have never defaulted. So I am sure my credit score is intact. Please suggest some ways to get out of it and how it can be done over a period of time. I have some jewellery (worth 1.2 lakh) that can be sold off to settle all the bills but I don’t want to do it as I am afraid, I’ll still go back to my old ways.

—Anshul Das

The only good thing you are doing is to not letting the credit card payments turn in an EMI, i.e. monthly instalments or paying the minimum amount payable. At the same time, your management of cash flows is poor to say the least. The credit card payment on a monthly basis is equal or even more than your monthly salary. This is actually living on the edge as there is just no savings as well as there is no factoring of any contingency, and you are taking care of your family’s financial goals either.

Read - Trapped in debt? Here’s how to get out of it

The first step for you should be to clear your credit card dues from your existing savings. If your savings is only jewellery then so be it and more so if you are not using the same and consider it as an investment. Alternatively, you can try to save an extra 5,000-10,000 every month which simply means to spend less by this much amount and use the surplus in banks to save. This will result in extra funds, provided you are financially disciplined. This can be invested in bank recurring deposits to create an emergency fund meant strictly for the same purpose. Once you have created a kitty for the same, which could be equal to 5-6 months of your salary, then you can start the savings for long term. But before that you need to reduce your number of credit cards from three to one or even close all your credit cards and move to spending via debit cards. Also, you need to have confidence in yourself that just because I have repaid all my outstanding will not make me spend more.

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Surya Bhatia is managing partner of Asset Managers. Queries and views at mintmoney@livemint.com

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