Make a Budget
My dad told me to make a budget. I was pretty shocked to see how much I was wasting on stuff I really didn’t need. I cut back at least $20 from every category that I could (food, entertainment and clothes). I then applied that $60 each month to my credit card. Even paying just a little over the minimum helps you pay off your cards years earlier.
High to Low
I made a chart of all of my credit cards and put them in order of highest interest rate to lowest interest rate. Next I called up all of my cards and asked if I could get a lower interest rate. I have four credit cards and two of them said yes, they would lower my rate. So then I made a budget that included the minimum payment for each card. Finally, I added an extra $20 to pay off the card with the highest interest rate. On my birthday or whenever I got some extra money I applied it all to my credit card. As soon as the first one was paid off I started on the second one until I had all my credit cards paid off.
I stopped using credit cards all together. I only use cash. I will never, never, never use a credit card again! Being in debt was the worst thing ever! I had collection agencies calling me and calling my family. My dad was so mad at me! He helped me by consolidating my two cards into one with a lower rate, then all I had to do was pay off that one card. It was much easier for me to do it that way!
Use Savings to Pay Debt
I took all of my money from my savings account and applied it to my credit card bills. Someone told me that if you are only earning 1% interest on your savings account but your credit card has a 14% interest rate it doesn’t make sense to have your money in your savings. I paid off a big chunk at once and then it just got easier. It only took me 1 ½ years this way. Now I have no savings but no debt either.
I used the debt snowball method. This is how it works: You pay off your lowest balance first, no matter what the interest rate. This is a mind trick because you feel good when you pay stuff off completely and you get rewards. So you still pay all of your minimum balances but you totally pay off the lowest balance card first, then when that is paid off you pay off the next lowest balance card. The best part about this one is seeing results. It makes you feel like you can pay it all off. It took me three years but it worked for me.
Calculate a Plan
Use a free calculator. I actually used the Credit & Debt calculators on this site. Once I saw how long it would take to pay off my credit cards I got see an end in sight. It really helped me not feel so bad. I had $10,000 in debt. My interest rate was 7.99%. Using a calculator I could see that paying $100 a month it would take me 13 years and six months to pay it all off. $$150 would take 7 years and 4 months. So just paying $50 more a month I could cut it down in half. But I was still paying $3,350 in interest. Money I was just throwing away! I also figured out that just paying $60 a month wasn’t enough to pay the interest! The faster you can pay the less money you waste. Once I could see that I really cut my spending and ended up paying $250 a month (most months) for almost 4 years, 3 years and 10 months to be exact. I ended up paying $1150 in interest. But just seeing how much I would be wasting was enough to get me motivated to get that paid.
Once I had gotten out of debt I got rid of all my credit cards except one for emergencies. I had a credit card debt of $25,000. I don’t even know how it happened. I was so scared. I told my school guidance counselor about it and she convinced me to be honest with my parents. My Dad paid it off for me. And then he made me pay him back. He charged me only half the interest as the credit card but he put that in a bank account. It was amazing to see how much money ended up in that account. Money I would have thrown away. I hate credit card companies. They offer you free things so you sign up and then your life gets ruined. If it wasn’t for my dad I would have started my life in financial ruin. Never again.
Do you have a story about how you got out of debt? Enter it in the comment section below.