Many of us are living month to month, paycheck to paycheck.
And credit card debt is one of the reasons for this.
It’s a burden we carry with us, seemingly for the rest of our lives.
Even though no one else can see it, you feel it, the dark cloud hovering over your head when you wake up in the morning and when you sleep at night.
But it doesn’t have to be that way.
If you simply ignore your credit card statements and just pay the minimum due, you’re not really paying off anything.
If you simply borrow money from a friend or worse, from a predatory lender or payday loan, to pay off your bill, you’re causing more harm than good.
You still owe your friend and if you don’t pay it off, your friendship will be irreparably damaged.
If you borrowed money from payday loan or cash advance company, you’ll owe an obscene amount of interest… even more than your credit card interest! You’ll be digging yourself into a deeper hole.
If you’re desperate for money, don’t call a 1-866 number that you see on TV, that promises to give you quick cash without a credit check or one that doesn’t care about bad credit. Nothing good will come out of that!
Trust me, this happened to us and the interest on this stupid loan was $250/mo! So in essence, we were paying $250 a month and not paying off the principal. It was like throwing $250 down the drain each and every month. Very depressing.
Thankfully, we managed to pay it off and quickly.Want to pay off debt but don’t know how to?
Here’s a 5 step plan on how to get started. Take it one step at a time. Make a plan and one day, you’ll be FREE!
1. Know what you owe.
A lot of people who are drowning in debt, got into this situation because they simply ignored their debt. By being unaware of the exact amount of debt you owe, you think you have more money than you really do. Then you end up continuing to spend more than you make, getting yourself deeper and deeper into debt.
2. Take responsibility for your finances.
Your finances are your responsibility, not your significant other’s or your parents’ (or your adult children’s) or a financial advisor’s.
For couples, it’s common for one person to handle the finances while the other plays dumb. Just because one person seems to have a better knack for finances, doesn’t mean the other person is off the hook. The person handling the finances could be just as clueless as you and could be digging you both deeper into debt.
You won’t know if they are really paying the bills or taking out cash advances for a shopping spree. You won’t know unless you take control of your own finances.
3. Differentiate between a “need” vs. a “want”.
Do you really need a fancy car, designer clothes, or the latest tech gadget? To get to this point, you’ll have to do some soul searching.
If you are secure with who you are, then you won’t need “things” to make yourself feel better. Consumer debt is usually tied to underlying insecurities. Look into practicing positive affirmations to build a better dialogue to yourself, in your head.
4. Create a realistic budget that includes a debt repayment plan.
Track your expenses for necessities for a few months on a personal budget worksheet. Make sure you spend less than you make. If your budget still exceeds your income, either find creative ways to save money or earn more money. Be sure to include debt repayment in your budget.
5. Pay more than the minimum amount due.
If you are only paying the minimum amount due, you are only paying the interest for your debt and none of the principal or amount you owe. It’s like running in a hamster wheel and getting nowhere.
Focus on one debt at a time. Pay more than the minimum on one credit card. When that one is paid off, move on to the next.
Pay off your debt as fast as you can, and you’ll start to see the light at the end of the tunnel.
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How to Start Paying Off Debt Now
FAQs
Snowball method: With this method, you prioritize paying off your credit card debts with the lowest balances first. The first balance may be small, but you feel accomplished and motivated to tackle the next one.
What is a trick people use to pay off debt? ›
Snowball method: With this method, you prioritize paying off your credit card debts with the lowest balances first. The first balance may be small, but you feel accomplished and motivated to tackle the next one.
How to pay off $5000 quickly? ›
Debt avalanche: Make minimum payments on all but your credit card with the highest interest rate. Send all excess payments to that card account. Once you pay that account off, send all excess payments to your next highest rate. Repeat until all of your debts are paid off.
How to pay off $20,000 in debt? ›
If you have $20,000 in credit card debt that you need to pay off in three years or less, you have multiple options to consider, including:
- Take advantage of a debt relief service.
- Consolidate your debt with a home equity loan.
- Take advantage of 0% balance transfer credit cards.
Make debt payments beyond the minimum.
Making more than your required minimum payment can help you pay off debts more quickly and save money in interest charges. Earmark unanticipated funds, such as your tax return or a bonus, for debt payments.
How to pay off $30k debt in one year? ›
The 6-step method that helped this 34-year-old pay off $30,000 of credit card debt in 1 year
- Step 1: Survey the land. ...
- Step 2: Limit and leverage. ...
- Step 3: Automate your minimum payments. ...
- Step 4: Yes, you must pay extra and often. ...
- Step 5: Evaluate the plan often. ...
- Step 6: Ramp-up when you 're ready.
Making late payments, even a single day late, can significantly affect your credit. This becomes especially true if you make a habit of paying late. Some lenders or credit card companies will charge you a fee for being a single day late and could cut you off from making further purchases on the account.
How long will it take to pay off $20,000 in credit card debt? ›
It will take 47 months to pay off $20,000 with payments of $600 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.
How to make $100 cash a day? ›
In conclusion, making an extra $100 a day is possible with some effort and creativity. You can start a blog, do freelance writing, complete online surveys, sell products online, drive for Uber or Lyft, rent out your home or space, sell photos online, or become a virtual assistant.
How to get rid of $40,000 credit card debt? ›
Options For Paying Off Substantial Credit Card Debt. There are a number of strategies to pay off large amounts of credit card debt. They include personal loans, 0% APR balance transfer cards, debt settlement, bankruptcy, credit counseling and debt management plans. You may be able to use more than one of these options.
However, one of the most important benefits of this rule is that you can keep more of your income and save. The 20/10 rule follows the logic that no more than 20% of your annual net income should be spent on consumer debt and no more than 10% of your monthly net income should be used to pay debt repayments.
What is the minimum payment on a $20,000 credit card? ›
Let's say you have a balance of $20,000, and your credit card's APR is 20%, which is near the current average. If your card issuer uses the interest plus 1% calculation method, your minimum payment will be $533.33. That's quite a bit of money to pay for your credit card bill every month.
Is 20k in debt a lot? ›
“That's because the best balance transfer and personal loan terms are reserved for people with strong credit scores. $20,000 is a lot of credit card debt and it sounds like you're having trouble making progress,” says Rossman.
What is the 50 30 20 rule? ›
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
What is a good emergency fund? ›
While the size of your emergency fund will vary depending on your lifestyle, monthly costs, income, and dependents, the rule of thumb is to put away at least three to six months' worth of expenses.
What is the avalanche method? ›
In contrast, the "avalanche method" focuses on paying the loan with the highest interest rate loans first. Similar to the "snowball method," when the higher-interest debt is paid off, you put that money toward the account with the next highest interest rate and so on, until you are done.
What is the fastest way to pay off debt? ›
Here are five of the fastest ways to achieve debt freedom:
- Take advantage of debt relief services. ...
- Reduce interest where possible. ...
- Focus on your highest interest rate first. ...
- Take advantage of opportunities to earn extra income. ...
- Cut expenses where possible.
Pay off your debt and save on interest by paying more than the minimum every month. The key is to make extra payments consistently so you can pay off your loan more quickly. Some lenders allow you to make an extra payment each month specifying that each extra payment goes toward the principal.
What is the easiest way to pay off debt? ›
Try the snowball method
With the snowball method, you pay off the card with the smallest balance first. Once you've repaid the balance in full, you take the money you were paying for that debt and use it to help pay down the next smallest balance.
How to pay off $8000 in credit card debt? ›
To pay off $8,000 in credit card debt within 36 months, you will need to pay $290 per month, assuming an APR of 18%. You would incur $2,431 in interest charges during that time, but you could avoid much of this extra cost and pay off your debt faster by using a 0% APR balance transfer credit card.
Many of us are living month to month, paycheck to paycheck.
