I am a recent college graduate, May 2017 to be exact. While I was blessed enough to have a full ride, and get through school with no student loans, I still have debt! Coming from a very low income household, I never really had anyone to depend on to get things paid on time. With me being obsessed with my credit score, lettings things go unpaid was not an option.
I say all this to say, the only major debt I have is credit cards. Funny how we use words like only, isn’t it. For my income level, my debt to income ratio is horrifying. However, the key to getting out of debt is recognizing the beast and then doing something about it. Follow these simple tips to start your journey with me to doing something about your debt now.
Tips to Debt-Free
1. Calculate Total Debt
Simple. No brainer. Calculate how much you owe. This can be as easy as adding up your current balances, or as complicated as making sure they stay there. Personally, I have one card I still use while the others aren’t even in my wallet. In my head, I have to spend the money anyway so I may as well get cash back. Eventually I will have to stop this.
That is a major key to this tip. Do not simply calculate debt. You must first STOP USING YOUR CARDS! It’s like hitting a moving target otherwise.
If you’re feeling really spicy, you can calculate this with what you’d potentially pay in interest with minimum payment. I like to think this step is a waste of time, because I WILL get it paid off before then. But if you’d like to see what you’ll be saving yourself, it’s a step worth taking.
2. Calculate Total Payments
Just the minimums. This number is how much you must pay on each card to be in good standing month to month. Let’s not over-complicate this tip any further.
3. Find Disposable Income After Payments
Once you know what your payments are, you can add that into your monthly budget. Any money after your bills and even your grocery budget, is disposable income. However, at this point we don’t have it to dispose. Give yourself a small potion for unknowns, and use the rest towards your payoff.
It’s a good idea at the end of this step to find ways to increase income if you aren’t satisfied with the amount you have. A great way to create a small or large amount of ice income is with Ebates Cash Back. I explain how to maximize earning that article and every little bit extra can go towards paying something off.
4. Create Payoff Terms
Use the debt snowball for this one. You can choose to pay the card with lowest balance first or the card with the highest interest rate. This all depends on what will keep you motivated and your balances. If you have high balances on account with high interest, you may do better paying high interest over eliminating small debts.
Simple as that. You’ve put the plan in place and now you’ve just got to follow it.