- Personal Finance
Eliminating Credit Card Debt Quick
With the economy not quite recovered yet, so many of us are drowning in credit card debt. There's no simple and easy solution to cancel how much you owe. It takes a strong will, dedication, and time to do this. I still have some to pay off, but I have been able to pay it down in the last two years by being dedicated to my budget plan. My last two years in college, I ran out of funds to support myself during the school year. Since I was taking time consuming courses, I was unable to work except for summer and winter breaks. As you can imagine, charging everything for a whole school year can really add up. By the time I graduated, I had my limit almost maxed out. In this hub, I'll share with you things I should have done differently and things I did do that made a big difference.
Creating a Budget Plan
The absolute first thing you need to do is get rid of your plastic! If you don't have a strong will not to charge more things, cut them up. If you can simply lock them away and not bring them with you on shopping trips, good for you! The first step is to stop charging! Once you've accomplished this, now you need to make a budget plan. If you are young and able to live at home with your parents...this is your best option! Working a full time job and using most of your paycheck to pay everything off is by far the best thing you can do. I got married a month after graduating college. That month's paycheck went towards wedding expenses. If I could go back, my husband and I would have waited another 6 months to a year before get married. That way, we both could have lived at home with our parents while working to pay off our bills. Before going into my junior year at college, I worked full time and put 90% of my paycheck towards my payments. I was able to pay off a $3000 bill in about 5 months. That's great and all, but then I went back to school without a job and started charging again. The next summer, I decided I would rather go out with friends and eat out all the time than pay off my bill. So I repeat, stop charging!
Next, list out every single expense you have monthly. Compare this to your monthly income. If you are spending more than you're making, it's time to cancel all the unnecessary expenses. Get rid of the newspaper subscription, cancel your premium cable package, or get rid of the home phone line and just use your cell phone. There are always things we can cut back on, for me it was eating out and shopping. I was a typical college student after all. The crucial step here is to figure out how much you were spending on the things you just eliminated and put that money aside monthly for your payments. If you don't stay on top of this, that money can easily get spent somewhere else. Your main goal here is to free up as much extra money as you can and be conscious about using that money for payments.
My husband and I didn't have a ton of things we could cut out of our expenses, so we concentrated on not going out to eat, grocery shopping at a cheaper store (ex: Aldi), and picking up extra side jobs. My husband got a friday night job helping out at a country club and I started to pick up pet sitting jobs while people I knew were out of town. If your expenses are still just below your monthly income, you may want to look into a permanent part time job or make money online. Silver Rose has a great hub about "How to make money with hubpages". Then make sure those extra paychecks go straight to your payments.
Getting rid of your bills
I think a good plan is to put every single extra penny towards your payments. Pick one bill that you want to pay off first. Most people choose the one with the highest interest rate. Others choose the one with the lowest balance. Whichever you choose, stick with it! Put every cent you can towards it and pay the minimum balance on all the other ones. If you are really far in the negative, I would suggest sticking to this plan until 3/4 of the total is paid off. If you aren't that much in trouble but need to get it paid off...I have a different plan for you.
Start by putting every extra penny towards the one you chose. Once you've knocked that first one in half, start putting 1/3 of that extra money into a savings account and 3/4 towards that payment. This way, you will start to build up an emergency/fun spending account at the same time you are paying off your bill. It's very important to have an emergency fund in case you lose your job or stumble across an unexpected expense (car repairs, etc.) However, if you are really far in the negative, it's even more important to get rid of it as fast as you can. Jump on the saving wagon once your total is 3/4 of what it was to begin with.
You know the drill from here...once that first piece of plastic is paid off, take that payment and apply it to the next one you choose. Keep making those big payments until that one is paid off too. Then take both those payments and apply it to the third one...and so on and so on. Remember to keep putting 1/3 into your savings account. With a lot of patience, time, and dedication...you'll be able to pay off everything you owe and have some money saved up. Remember to reward yourself a little bit every time you pay off one of those plastic nightmares. Go out to dinner one night or go to a movie in the theater. Something that will put a smile of accomplishment on your face but won't break the piggy bank. Once you are living payment free, start saving for a trip or saving for something fun. The keyword here is SAVE...don't charge. Once you get into the habit of saving for the things you need or want, it will be that much easier not to charge them and rack up the bills again. Remember to still put 1/3 towards your savings account. Most people recommend an emergency fund with 3-6 months of living expenses saved at minimum. I recommend saving as much as possible while still setting money aside for that vacation.
It might be necessary to take drastic action to pay off whatever you owe. Such as selling your car and buying a cheaper one or taking public transportation. If you are renting, try looking for a cheaper place once your lease is up or finding a roommate. Look around and sell anything you don't need: xbox 360, video games, books, clothes in good shape, etc. If you find ways to make the money and stick to it, you'll be living free soon! Sticking to our plan, my husband and I have knocked our bills in half and will continue on our course until it's all paid off. Then you better believe I'm saving for that cruise I've always wanted to go on!
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