If you’re in credit card debt, it can sometimes feel like there’s no hope of ever getting out of it – but don’t lose hope! You can break the cycle, dig yourself out of credit card debt, and eventually live debt free as long as you use the right tools and are willing to put in the work. In this article, we’ll break down how you can start making progress in paying off your debt and start seeing the light at the end of the tunnel.
First, review all your open credit card accounts. For each one, jot down the total owed, as well as the interest rate. You can use a spreadsheet or a simple pen and paper – whatever works best for you. Tally up the total so you have a final number to work with but hold onto your list for later reference. A single number of your total debt is helpful, but you will need to go back and reference the individual accounts on your list too.
There are many ways to pay down debt, but two primary methods stand out as the most popular:
There are pros and cons to each of these methods. The avalanche method will be less expensive overall, but won’t bring tangible results for a while. This is because your focus in on eliminating the highest interest rates first – so over time, you will be charged less in interest on your loans. However, it may take some time before your loan with the highest rate is paid off in full. On the flip side, the snowball method brings quick results, but may cost more in the long run. While you focus on your smallest debt first, you can quickly feel some progress by completely eliminating it. On the other hand, this could leave high interest rate debts open for a lot longer, and cost you more in interest.
Review each method and choose the one that suits your lifestyle. Then, reference the list you made in Step 1. Write down your debts in the payoff order you’ll follow, whichever method you choose to follow.
Next, start maximizing your monthly payments toward the first debt on your list. To do this, review your budget and look for ways to cut back – especially when it comes to discretionary spending like eating out, streaming services, and other non-essentials. Your goal should be to put every cent that you reasonably can towards paying down your debt. Don’t be afraid to make drastic lifestyle changes as you work on paying down debt. Remember, this is temporary!
Another way to find extra funds for your debts is to boost your income instead of decreasing spending. Try asking for a raise at your current job, looking for a new job with a better salary, or start a side hustle.
As you focus on the first debt on your list, be careful not to neglect the minimum payments on your other debts. When you’ve identified the first debt on your list, you’ll reduce the payments on your other debts to the minimum so that any of your extra funds can go towards your target debt. However, if you neglect the other debts entirely, they can spin out of control, so make sure you keep an eye on them too!
If you have a lot of debt across high-interest cards, consider debt consolidation through an unsecured loan. A debt consolidation loan combines all of your debt into a single payment, often with a lower interest rate as well which can save you considerable money over the life of the loan. However, it’s very important to only pursue this route if you know for certain that the loan will not land you even deeper in debt. Click here for more information on debt consolidation loans.
Credit card debt can be an enormous burden to bear. Not only does it impact your financial outlook now and in the future, but the stress that comes from being in debt with no end in sight can be difficult to deal with too. Don’t give up hope! By using the tips outlined in this article, with some patience and consistency, you can start working your way to living debt-free!