Let’s look at how to get out of debt — it’s easier than you think! I can promise you this. This article contains helpful tools, strategies, and even calculators that will make paying off your debt possible.
Let’s be brutally honest, being in credit card debt sucks. Owing any amount of money to a credit card or another person sucks. You have to spend so much of your incoming cash on paying back something that you already experienced a long time ago. Instead of seeing the money from your paychecks, you need to use the cash to pay back some bill that comes in the mail every month.
This is why we need to work on crushing that annoying credit card debt for once and for all.
“If you think nobody cares if you’re alive, try missing a couple of car payments.” – Earl Wilson.
Does every dollar matter in paying off debt?
Yes it does 100%. Before we jump into the tips, we’re going to look at this helpful calculator that shows you the dramatic impact that small additions to your current monthly payment can make.
For this calculator I suggest that you try out the following: add up all of your debt in the first box and then plug in the interest rate, along with your current payment amount. Then figure an extra amount you can add above and beyond your minimum payments to accelerate the paydown process.
Are you not shocked by what adding $20 a month to your current debt payments can do for you? Notice you how much you save. Lesson learned is the real cost of debt is not the repayment itself but the interest cost compounded over time. Try different amounts to add to the payment and notice the difference. Now decide what it is worth to you.
Let’s jump into how you can finally crush your debt…
Hide your credit cards for now.
If you owe thousands of dollars to your credit card, you need to understand that you obviously have a problem with using credit cards. This is why you need to ditch your plastic while you work on removing your debt. This is only going to be short-term.
If you don’t have the self-control to not spend $100 on your credit card every time that you walk into a mall, then you really need to hide your card for now. Hopefully you remember where you hide your plastic because you’re going to need it eventually. From a logical point of view you’re running away from the problem. On the emotional side of things you’re getting rid of an element that’s costing you money and stress.
Then you can out your emotions aside…
Calculate what you owe.
It’s mandatory that you find out how much money you owe exactly. This way you’ll actually see progress when you’re paying down your debt. It’s also important to know where you stand.
Get all of your monthly balances and organize them to see where you owe money. You really need to figure this out so that you know exactly how much money it is that you need to pay back. This number might be depressing. Don’t worry about that. We’re here to fix things!
Request a lower interest rate on your credit card debt.
If you never ask the answer is always no. Remember that line for every area of life. If you never asked your current partner out the answer would’ve been no. If you never ask for something you won’t get it. Are people supposed to read your mind?
This is why I believe it always helps to ask. I strongly recommend that you call the credit card company (or companies) that are charging you the highest interest rate. You then kindly ask them for a lower interest rate.
How do you ask for a lower rate?
It’s actually not that difficult at all to ask a question. We just have this unexplainable fear of picking up the phone and calling a stranger. I’ve been guilty of this far too many times. Once you start picking up the phone and calling random strangers, you’ll get brave like a drunk person on Twitter.
Yes it can be nerve wrecking at first because so many of us have this weird phobia of making a damn phone call! Stop being lazy and pick up the phone. It’s not that scary. I promise.
I recently helped a friend go through this process.
- What you do is call that number on the back of your credit card or on your statement.
- You ask to speak with a customer service rep.
- Explain your situation to them.
- Tell them that you’re serious about getting rid of your annoying debt.
- Show them how they’ve already made some money from you (all that interest you’re paying for).
- Show them that you’ve become committed to becoming debt free.
- Then kindly request a lower rate.
You can also tell the company that you plan on picking up a balance transfer from another company. Trust me that they really don’t want to lose you as a customer.
It’s also important to remember that in negotiations it’s he who cares less that always win. If you prove that you’re willing to walk away this will create some strong leverage for you.
Now of course, every conversation with a customer service rep in a credit card company will be different. Not every employee will react the same way. You can always hang up on and try back another time.
I also realize that there are many complex scripts for your first phone call to a credit card company out there. You don’t need a fancy script. You just need to follow the basic framework mentioned above.
Mandatory action: DO THIS. Call the credit card company charging you the highest interest rate and kindly ask for a reduction. Track your results.
Consider consolidating your loans.
Getting a reduced rate won’t always solve all of your problems with your debt. If you have too many monthly bills coming in to even keep track of, you might want to look into loan consolidation.
When you consolidate your loans, the company you work with will buy your debt essentially and you’ll only have to make one payment per month. This will simplify your financial life and give you a clear picture of where you stand.
You’ll make one simply monthly payment and it’ll be much easier to track your progress this way. Many of my friends and readers have praised this idea. The ability to make only one payment reduces the odds of missing payments and hurting your credit score.
However, there’s one major setback with consolidating your debt. It’ll take you a longer time to pay off your debt. Can you live with this? Is the trade-off worth simplifying your financial life? Only you can answer that question my friend.
Get rid of your crap for cash.
Have you seen the movie Fight Club? I love the various themes presented in that movie. If you’ve seen the movie then you know all about the Tyler Durden philosophy about society and spending money. Durden believes that the things that you own end up owning you.
For example, when it comes to home ownership what this means is that the condo that you own will end up owning you. While trying to maintain an unrealistic or expensive lifestyle, you lose sight of everything else because you’re always working and worrying about paying your bills.
When it comes to credit card debt I interpreted Durden’s philosophy as this: you use your credit so that you can buy crap that you can’t afford. Then you spend a long time trying to figure out how you’ll pay this money back. Now these items that you once purchased so happily end up owning you.
Has this happened to you? Is your place filled with crap? Are your possessions taking over your life? Take a look around.If the answer is yes, then don’t stress too much.This is a really easy problem to solve. You just need to start selling off your crap and stop buying new junk. You can always find a way to get rid of your stuff.
If you want to start putting more money towards your debt, you’re going to have to part ways with some of the crap lingering around your place. Since this isn’t a guide about selling for profits online I’ll share my quick mandatory action with you.
Mandatory action: Go on Kijiji or any other online auction site that you use. Find the closest item beside you that you no longer need and put it up for sale on the site. You should have a few replies in a matter of hours if your price is reasonable. Once you get your first item sold, try tweaking the process until you find a way to get rid of all of your other stuff. ?e quick win of selling your first item will get you hyped about selling the rest of your crap.
Figure out how you’ll pay off your credit card debt.
We’re near the end and it’s time for the most important part. The most important step to actually paying off your annoying debt is figuring out which plan you’ll use. There are two popular schools of thought when it comes to becoming debt free. First of all, it’s stressed with both strategies that you should always make the minimum payment on each balance.
Moving forward with paying off your other credit accounts you have two options:
Option #1: The Debt Snowball Method introduced by Dave Ramsey. This strategy requires you to put the extra money towards the debt with the lowest balance. Once you make the minimum payment on all of your balances you put any extra cash that you have towards the balance where you owe the least amount of money.
The goal here is to get a quick psychological win by eliminating a credit card balance from your life and seeing the direct result of your hard work. This is the emotional side of paying off debt.
This quick win will also create momentum. There’s no telling how far you can go with this momentum. It could encourage you to find ways to save more money or to figure out how you can free up cash through selling crap. The euphoria that kicks in when you’re killing off debt feels pretty damn great.
The obvious criticism with Ramsey’s Debt Snowball is that it’s not the mathematically correct option. You’ll spend more money on interest on your journey to becoming debt-free by going for the lowest balance.
If you just can’t get over the math issue here, then you can move on to reading about the next debt killing strategy.
Option #2: You pay down the debt with the highest interest rate first. Once you make the minimum payment on all balances you put all of your other money towards the balance with the highest interest rate. As you can clearly see, this is the option that makes the most mathematical sense. This is the option for those of you that want to be logical with paying down your debt.
By getting rid of your high interest debt first you spend less money on interest on your journey to becoming debt free. If you’re strictly about the numbers, then this plan will make you happy.
The only issue that I see with both strategies is the fact that there’s no one-size-fits-all answer when it comes to personal finance or debt management. This is why you need to go with the plan that sounds the best to YOU. Don’t base all of your financial decisions on what some “expert” that you’ve never spoken to suggests. Screw that. This is all about you and what works for your unique situation.
Mandatory action: If you’re goal is to become debt free from credit cards, then you need to decide right now which strategy you’ll use. Pick one and stick to it. Track your progress. If you like what you see then keep on going until you’re a debt-free stud.
How can you decide on which strategy to use to pay down your debt?
I’ve included a tool to show the fastest and most emotionally satisfying way to pay off multiple debts. You simply run the numbers with the super-helpful financial tool listed below. You plug in the numbers and the calculator will do the rest for you.
What if I want help to ensure that I’m actually going to pay off my debt this time?
ReadyForZero is designed to make paying off debt easier for you. The best part is that it’s totally free. You don’t have to pay anything (and you shouldn’t when your goal is to be debt free).
How does this program make paying off debt easier for you?
- Securely link your different accounts (credit cards, student loans, and mortgage).
- Create your own unique plan to get out of debt with this software.
- Stay on track with your goals with email reminders and friendly updates.
- Pay off your debt.
The whole point of this software is to help you kill off all of your debt (from credit cards to those damn student loans).
Is this program legit? I met two folks that work with this company when I was in Denver at a Financial Blogger Conference (wilder than it sounds). They explained it to me and I was interested in learning more. My initial concern was that I don’t like to promote products to you guys that I don’t trust or that cost you much. I was then informed that the cost is absolutely nothing and that you can have all of your questions answers on the FAQ of the homepage for ReadyForZero.
This is a legit program to use when you want to get out of debt.
How do you get out of debt?
You put all of your details in first so that you see where you stand. The screenshot below is a payment plan. You create this plan on your own, based on your finances and when you want to become debt free.
Then you track your progress. You’ll have a visual reminder and constant updates about where you stand with your debt. Once the bar hits zero, you can bust out the vodka and invite me for some drinks, because you’re officially debt free.
What are the other benefits of using this program to become debt free?
- There are friendly email reminders.
- You have a visual look of your debt and your progress.
- You finally have a plan and a light at the end of the tunnel.
- There’s an iPhone app.
- You’ll finally get rid of that annoying debt!
Are you ready to get serious about paying off your debt? You can sign up for your free account with ReadyForZero to finally become debt free and live the life that you’ve dreamed of.
Keep on going with paying off debt.
The final step is to keep on going. Becoming debt free will take some time. Regardless of the strategy and approach that you take, becoming free of debt doesn’t happen over night.
The good news is that there is a light at the end of the tunnel. You don’t have to be in debt forever. You invested your hard earned money into this guide. This means that you’re serious about crushing credit card debt. I promise you that if you keep on going that it’ll be worth it in the long run. You can have thousands of dollars saved up one day.
“Remember today, for it is the beginning of always. Today marks the start of a brave new future filled with all your dreams can hold. Think truly to the future and make those dreams come true.” – Unknown