I don’t know about you but I hate debt.
It gives me anxiety.
I don’t like owing people.
I got my first credit card when I was 18.
My mom tried to warn me, but I didn’t listen.
At 18 I got every card I could think of and I maxed each one out.
I have paid that debt off since then, acquired more, and now I can say in the 2020, I was able to get all my credits down to less than $100 balance, during a pandemic.
In 2021, my goal is to maintain a low balance on my credit cards, while attacking my car payments. I also want to start attacking this school loan debt.
The golden rule is that you do not want your credit card to exceed 30% of the credit limit.
My goal is to definitely stay under that!
I was doing some research and I found that most people my age, 35 and under, have
- Student loan debt
- Credit Card debt
I know this was true in my life until I paid off my credit cards.
Today, I want to share what I did to pay off my credit card debt and leave you with some methods that can support you in paying off your debt as well.
Let me just say this was credit card debt that I had acquired like 2 years ago.
Here is what I did:
- I lived below my means. I quit my job in November 2019 to work for myself full time March 2020 but Covid hit and messed my plans up a little bit, especially having small children. Living below my means helped me to be able pay above the minimum payment. Living below my means will also help me to maintain my balances in 2021.
- I paid more than the minimum balance on my credit cards. It helps with interest and it just made me feel better. I always tried to pay more than the minimum if I can.
- I committed to getting rid the debt when I got a lump sum of money. I had about $3000 in credit card debt and when I got my lump sum, I paid it off.
And it felt good about it too.
Starting the year with a “clean slate” regarding credit cards!
Now I understand everybody can’t pay down their debt with a lumso I have a few methods for you below:
- The Avalanche Strategy
Find out the interest rate you pay on each of your debt accounts.
Make the minimum payment on all of your accounts first, and then use any additional income money to pay off.
Once you pay off the card with the highest rate, you move to the account with the highest rate.
This works because it minimizes the amount of interest you pay as you repay back the loans.
You will save the most money using this strategy
- The Snowball Strategy
This strategy cost more over time but it is the most popular.
First, you want to go back over your list of accounts and rank them from least to greatest account balance.
Then, you repay them in the order from lowest to highest.
If you have higher balances on accounts with high interest rates, this approach will cost you more money over time.
But because you see yourself paying off debt, you may have a better chance of seeing this method through until you reach your goals.
- Mixing & Matching Strategies
At the end of the day you have to find and use methods that will support you in reaching your financial goals.
Get familiar with both strategies and do what works for you.
You are NOT going to reach your money goals by staying in a box.
You are going to reach your goals by knowing what they are and keeping them at the forefront of your mind, especially when you are making financial decisions.
If your goal is to get out of debt, begin implementing one of the above strategies today!
Until next time!