How would you feel if you’d paid down $5,500 in credit card debt?
I can tell you that it feels f-ing amazing.
It wasn’t easy as I struggled each paycheck spending most of my excess income towards my credit card bills, but it was worth the pain. Everything changed when I became intentional. It wasn’t just enough to want to be out of debt, I needed a strategy.
I became committed to eliminating all of my debt once and for all and created a 1.5-year plan to pay off all of my credit card debt.
The rest is history.
Getting into Debt
Ever since I’ve had my first credit card I racked up unnecessary debt. It’s a strange feeling, but when I had my trusty piece of plastic I felt not limits in my purchasing power. Dessert was now an option when I went out to eat with friends. If I went out shopping for clothes I found myself buying shirts I would never use.
I know now to leave my credit cards out of sight!
Fast forward a few years and I eventually started playing with larger debt. Getting approved for a $2,300 credit limit was a huge mistake.
While in college I ended up taking an extra year to graduate because I’d lost a bunch of credits after transferring from my community college. I eventually decided that I would take summer classes to graduate sooner.
3 summer classes to be exact.
As you may already know not all classes are created equal. Some have more credits, and depending on the subject some may cost more or less. On average my summer classes were about $1,100.
Little did I know that the summer of my junior year in college would be the beginning of a long debt journey. Being recently approved with my $2,300 credit card limit I’d decided to finally use my new piece of plastic. I had 12 months of interest-free with my new credit card, so I figured it was the perfect opportunity to pay for 2 of my summer classes.
During this point in time, I had other credit cards from Best Buy, Chase, and Macy’s that also had debt racked up. I didn’t think much of it since I felt that I could afford it. After all, I was making more than the minimum payment right?
I continued making the payments for each of my credit cards, but it just felt like I was trapped!
I didn’t think much of it, but eventually, I started falling late with some of my payments. It wasn’t that I couldn’t make the payments, but rather it became a total nightmare remembering to pay each credit card.
To make matters worse I noticed that one of my credit cards had an unusually high payment due. After reviewing my credit card statement, I noticed that I was being charged $70 in interest alone! I had over $2,000 in credit card debt for this card, and at the rate, I was paying down this card down it would take me approximately one year to pay it off.
I’d decided in that instant to not make another payment like this ever again. I brainstormed on a few options such as making larger payments and eventually landed on the idea of applying for a new credit card. Working in the bank for years taught me some of the perks credit cards can have, such as 12-18 months of paying no interest.
I immediately applied for a Bank of America credit card that had a promotion of no interest for 12 months. To my surprise, I was approved for a $5,500 limit. I quickly consolidated all of my credit card debt into this credit card.
My total amount was close to $5,500, an amount I would have never imagined. I managed to make consistent $200-$300 payments each month. Staying committed I was able to pay down all of my debt within a 1.5-year timeframe.
Determine your “Why”
I think most people would agree that carrying debt is a bitter feeling.
However, it’s not enough to just want to get rid of your debt badly. You have to understand clearly why you’re paying down your debt. This keeps you focused and motivated in the debt-free journey.
My great intentions were in vain when I’d overspend my budget each month. I’d make payments of $100-$200, and spend close to the same amount using the same credit cards. I became stuck in an ugly cycle of bad money habits.
It was at this point that I knew I needed to change my bad money habits. What really created a sense of urgency for me was paying my first $70 bill solely on credit card interest.
This forced me to create a strategy and to stay committed each month when 40-50% of my paycheck went straight to my credit card bill. I not only wanted to finish paying my credit card debt, but I wanted to avoid getting myself in a similar situation.
My why became crystal clear. I craved financial freedom.
There were many times that I wanted to throw in the towel, but I quickly remembered why I had decided to pay down my credit card. I’d chosen to not live pay check to pay check, and to become financially free.
If you’re ready to do the same, then mentally prepare yourself for a long battle.
Laying your options
Whether you have credit card debt or student loan debt the formula remains the same. Cut down your expenses, and make consistent payments each month. Set a date to pay all your debt off or it will never happen.
If you have no sense of urgency, then your bills will remain beside you for a long time. My total sense of urgency forced me to find a solution and inspired me to create effective money habits to avoid making the same mistakes.
Don’t shoot for the stars just yet. You might feel overwhelmed, and would like all of your debt paid off but patience is key. Review your budget and decide what’s the most you can pay each month without sacrificing your core necessities.
It won’t do you any good if you pay down $1,000 from your first paycheck only to use your credit card again out of necessity. You also want to start making easy wins to get some motivation flowing and avoid burning out.
Make it easy for yourself to make consistent payments. Nowadays most banks have online bill pay that allows you to schedule automatic payments each month. Set it and forget it.
Your paycheck will be smaller since part of your income is automatically being deducted to pay your bills, but it’s only temporary.
I leveraged my experience in having deep knowledge with the different credit cards available to consolidate all of my credit card debt into 1 single credit card.
If my strategy applies to you, and you have a great credit score then feel free to do the same. However, I know that not everyone is in the same situation so it’s important to leverage your knowledge to create your unique solution.
This is a practical method that you can use to pay down any type of debt.
Review all of your credit cards, and debt accounts to determine which has the smallest balance.
After doing this you’ll want to pay down your smallest balance first. You’ll continue making payments to the other accounts, but you’ll only be making the minimum.
Credit Card one: $500
Credit Card two: $1,500
Student Loan: $15,000
In the example above you’ll focus on paying off your $500 credit card first, while making the minimum payment on the remaining accounts.
Based on your budget, set a date to fully pay off your smallest credit card balance.
There are 2 ways to pay down debt faster.
- Increase your income
- Cut your expenses
If you want to take it even further you’ll continue to cut your expenses even when you generate a higher income. This is a sure path to becoming wealthy.
Start by eliminating what got you into this mess in the first place. Track your spending patterns each month so that you can eliminate unnecessary expenses. Don’t underestimate the impact on small purchases.
I managed to save $500 a year by breaking my bad coffee purchasing habits.
Stay consistent in making your payments each month while keeping your expenses low. Eventually, you’ll begin to see your hard work pay off.
Sometimes your current income slows you down with how fast you’re able to pay down your debt.
This is why side-hustle are a great option. It sounds easier said than done, but if you can spare an extra 5-10 hours per week you can make it happen.
You can either try looking for a traditional part-time job or work remotely.
You can do this by freelancing on the side with a specific skill you possess. For example, you can create websites, or write content for other blogs.
You don’t have to waste your time researching on the web for different side hustles. Download my free 7-Gig checklist where I cover the top side hustles you can use to earn extra income. They are legit and include side-hustles I currently use myself.
Just click the download button below.
Any income you earn from your side hustle should go straight to paying down your debt. Don’t use this money to go out for dinner, or drinking with friends (tempting I know).
Paying down debt is one of the biggest challenges that millennials and thousands of Americans face.
A recent study showed that our income growth is growing at a slightly slower pace than our cost of living expenses. This means that we have to be at the top of our games more than ever. Stop trying to keep up with Jones’s and focus on growing your wealth to create more freedom in your life.
My bad financial decisions have given me great lessons to learn from. It didn’t come easy and I was forced to create effective money habits.
I challenge you to create a strategy to start eliminating your debt today.
First, determine why you want to be debt free to avoid quitting half way.
Then begin by writing down all of your current debt accounts. This includes your credit cards, mortgages, student loans, car notes, etc. Next order your debt accounts from smallest-largest.
Review your budget and determine what’s the most you can pay each month. Don’t overcommit, and set a realistic amount.
Finally, let your creativity flow. You’ll come up with effective strategies when you have your back against the wall.
As you’re paying down your debt, start creating effective money habits. You can accomplish this by reading finance books, watching documentaries, and consuming educational information from other mediums.
I would’ve never thought that I’d form the money habits that I have today. About 2 years ago I didn’t pick up a single book because I claimed that I didn’t like to read.
Today I read a minimum of 1 book per month on personal finance and many other subjects. I’ve also created powerful morning routines that set me up for success every single day.
How far are you willing to go to reach financial freedom?
I know you’ve got this!
Questions for you:
What is your smallest debt?