Happy New Year!
I always love the New Year! Its like the most perfect time to clear out the old and update, organize, and commit to the new. Like most people I enjoy writing my list of "New Years Resolutions" in hopes of kicking bad habits to the curb. This year one of the resolutions that I can actually stick to is to become more finically focused. Transitioning from "college student" to "real live adult" mode was somewhat of a challenge for me. I was so used to having a disposable income that I never really realized the importance of properly managed finances.
In my quest for a tidy checkbook, I decided to first tackle my credit card debt. I don't have excessive debt but its a little more than I'm comfortable with. I was in tremendous debt when I first discovered credit and I created a method to eliminate it comfortably. I instantly boosted my credit score and the contents of my wallet. Paying off credit card debt is often an ignored task that people tend to put off, but remember the sooner you pay it off, the more money you save in the long run.
Step 1:
Know what you owe…down to the last cent!
Log on to each and every credit account online (you should ALWAYS have your financial balances at your fingertips especially to avoid overdraft charges). Record each balance, minimum payment due, & payment due date. Put your accounts in order, then add up the total. I like to use a spreadsheet, you can make your own or you can download mine from the link below to easily organize and update everything.
Step 2:
Make sure any subscriptions or automatic payments are canceled or transferred to your debit card.
You will never pay off your credit cards if you have something that is being charged on it every month. Once you have to spend real live earned dollars on something (instead of credit) you will begin to think twice about whether you really need it or not.
During this step, you might want to remove a few cards out of your wallet, just so your not tempted to use them again. I recommend removing the card(s) with the highest balance and the card(s) with the lowest balance.
Why leave any cards in your wallet? Because the main purpose of a credit card is to use in case of an emergency. You don't want to be at the register in the grocery store when you just realized that your phone died and you forgot to transfer money to your checking!- and trust me it happens.. However if you know that your card is already nearing its limit and your working hard to pay that off, you will remember to pay off that shopping trip-- since you were going to spend that money anyway.
Step 3:
Prioritize your lines of credit.
*For 1-2 Lines of Credit
Set a weekly pay schedule. It may seem hard at first but it will get you to your goal sooner than later. If you get paid bi-weekly, still set the weekly schedule so your putting that "money" aside, just set up a payment for the week that you get paid.
I paid off my first debt with $200/ week. My total balance was about $1,000 between two credit cards. I took the first $200 off the top of each check (back when I got paid every week) and put those dollars towards the two cards. By staying consistent and budgeting I was able to pay down my credit card in a little over a month.
*For 3 or more lines of credit I would recommend using one of the methods below.
The Snowball Method
This is a method where you pay off your credit cards in order of balance; from smallest to largest. Paying off the smaller balances first, one at a time of course, may be easier for you. The smaller the balance is the quicker it can be paid off. Paying off those smaller credit cards may just give you that boost of confidence that you need to motivate you towards paying off your larger balances.
The Unraveling Method
This method is the exact opposite of the snowball method. With the Unraveling method your lining up your debts from largest to smallest and unraveling them, one card at a time. Paying off the highest balance first may be the best method for you if;
* You are at or over your credit limit
* You are paying high interest rates
Please remember to have patience and perseverance during this process. Getting out of debt doesn't happen overnight, it definitely takes some time. Whether it be 1 month or 5 years STAY CONSISTENT and don't give up! Even if you can only afford to pay $50/ week it will pay off, once your debt free your pockets will thank you :)
What Method Do You Use To Pay Off Your Credit Card Debt?
