After you pay your mortgage or rent, buy groceries, and send in the car payment, there may not be enough money left for the month. It’s easy to use a credit card to fill in the shortage. But before you know it, you’ve run up massive balances, with no idea how you’re going to pay off your credit cards.
According to The Motley Fool, the average American family with credit card debt owes over $15,000. Whether you’re below or above this average, this article will give you the basics for paying it off. And get rid of it forever.
Know Your Total Credit Card Debt
First of all, you need to face the total amount of credit card debt you have. Gather up all your credit cards. Log on to every card’s site or grab all of your credit card statements for the last month. If you can’t log in or find your statements, call the account number on each card and write down your current total balance.
Add up all of your total balances as of today. This is your total debt, and it’s what you’ll need to pay off. Draw yourself a thermometer or download ours or one online and write in the amount of your total debt.
Tape this thermometer where you’ll see it every day–on your fridge or your bathroom mirror. This is an essential step because to pay off this debt, – you need to have a daily reminder it’s there. It will also get you subconsciously thinking about how to find money to pay off more of the debt.
Then make a list of your balances on each card from least to highest. This is the order you’re going to pay off your balances.
Here’s the tough part: if you want to pay off your credit cards, once and for all, you’re going to have to stop using them. If you use credit cards to get you through the month, this is going to be hard, because at first – you won’t have quite enough money to get you through your paycheck cycle.
Pull out your debit card and commit to using it, and only it, from here on out. The rest of your credit cards can be cut up. Yes, that’s right–cut them up with a pair of scissors and throw the pieces in the trash.
If that feels too permanent, grab a bowl of water, drop your cards in, and stick it in the freezer. You can literally freeze your credit cards so that they’ll only be available for an actual emergency.
Save Up a Buffer
To stop using your credit cards for emergencies, you need to have an emergency fund. The very first thing you’ll need to do is come up with $1000 if you don’t have any savings available. This will be your emergency fund while you’re paying off your cards.
How do you get $1000? The easiest way is to sell unwanted items on eBay or in a yard sale. Or pay the minimums on your cards until you can save the money from your paychecks.
$1000 can help you deal with most emergencies during the time you’re committed to paying off your debt. But if you don’t have that cash savings, you’ll have to put the emergency on your credit card, which you don’t want to do.
Spend What You Have
You’ve got to figure out how much money you actually have to pay your monthly bills, along with your credit card debt.
First, figure out the monthly minimums on each of your cards. Now add those up. This is the total amount of money you need to set aside to make sure you can pay each card for the month. (Don’t worry about them just being minimums – you’ll add to this amount later).
Next, add up the total expenses you have each month. Think about groceries, restaurants, utilities, clothing, mortgage or rent, car payments, tuition, insurance costs, and gifts. It might help you to look through your credit card statements and see what you’ve spent money on over the last few months.
Add up your total expenses and your monthly credit card minimums. If this amount is higher than your monthly paychecks (and it probably will be), then you need to start slashing. Think of any expense you currently have that isn’t absolutely necessary.
Eating out is an excellent expense to start with. Instead of eating out every day at work, could you start bringing in a sandwich? For clothing, could you wear what you have and not purchase anything new for a few months? Could you carpool to work to slash your gas expenses? Could you sell your car and buy a cheaper one?
If the difference between your expenses and your earnings is huge, then you may need to think about making more money. What can you sell? Can you ask for a raise? Or what side gig can you take on to make up the difference between what you spend and what you make?
It may be easier to slash expenses than it is to earn more income, so consider starting there.
Use Every Extra Cent on Your Credit Card Debt
Once you get your expenses down, use every spare cent to pay down your debt. You won’t ever have extra money if you wait to pay your debt at the end of your pay cycle. So right after you pay your rent or mortgage, pay your credit cards.
Commit to sending in as much extra money as you can to the card with the lowest balance. For example, if you owe $1,213.71 on your Lowe’s card, then send in your $50 monthly minimum payment plus an extra amount of $150 (or whatever extra you’ve decided you can pay) to that card.
Now, color in your thermometer with the amount you’ve just paid off, even if it’s a tiny sliver.
If you can stay focused, you’ll make progress and get the balance paid off on that card. Then, you’ll have that minimum payment ($50) plus your extra payment ($150) to apply to the next credit card you’ll pay off! This is called the “Debt Snowball” method, and it’s hugely motivating because you can see results fast.
Pay Off Credit Card Debt For Good
Know Your Total – Stop Digging – Save Up a Buffer – Spend What You Have – Use Every Extra Cent on Your Debt
At first, your credit card balance will seem huge and impossible to pay off. Over time, you’ll notice all your extra payments working to pay down your total balance. It may take a long time–maybe even years–, but once you pay off that debt, it will be gone forever.
If you commit to never running up a balance again, you can enjoy freedom from credit card debt for the rest of your life.
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Article written by Laurie