If one of your financial goals is to crush debt this year, you’re not alone. The average American currently has about $23,325 in personal debt, not including home mortgages, according to a recent study by Northwestern Mutual.
How will we ever accomplish the important things we want to do with our money, when we’re stuck paying for stuff we bought years ago — plus interest?
My Credit Card Payoff Journey
Thirteen years ago when I first launched the January Money Diet, I had $12,000 of debt spread among four credit cards. Each month I’d pay more than the minimum balances, so I felt somewhat virtuous that I was working on the problem.
Yet each month, I seemed to find a reason to charge a few new things. After all, I was earning airline miles with every purchase on one card, and a whole 1% rebate on another! I also had an excellent credit score, which many financial experts said was very important. Of course, these justifications only fueled my self-deception. Meanwhile, the total amount I owed continued to creep up each month.
Finally, I could no longer stand the constant, sickening, dark cloud of debt. I decided to try Dave Ramsey’s Debt Snowball Plan.
Here’s how it works: You focus on aggressively paying down the debt with the lowest balance first, while making minimum payments on the other cards. It’s a psychological boost to pay off that first debt, which builds momentum.
Next, you move to aggressively paying off the card with the second-highest balance — which goes faster (like a snowball) because you have one less bill to pay. You get the idea.
Today I carry one credit card for emergencies. I make purchases with a debit card, which doesn’t allow me to spend money I don’t have.
Here is some additional information that may help in your journey to crush debt:
From The Little Frugal House, a free printable debt payoff worksheet.
From Ramsey Solutions, a snowball debt payoff calculator.
Pay down your balances faster with these extra ways to earn money.
From Jackie Beck, a debt payoff coloring sheet.
Your Get Out of Debt Challenge
Are you struggling with debt?
Could you divide your outstanding balances by 12, commit to paying 1/12 of the amount plus interest every month, and eliminate that debt altogether?
Could you put the card in a safety deposit box or under your mattress or somewhere where you won’t be tempted to use it at all in the next 12 months?
If you owe on more than one credit card, could you get the scissors and cut up one of two of those cards? That’s what I had to do; I destroyed the cards so I couldn’t use them any more, which forced me to be good.
If your balance is too high to completely pay it off in 12 months or if you owe money on several cards, could you commit to paying $200 a month or even $100 a month to eliminate a significant chunk of one of those balances?
I know that once I set a monthly goal for myself, I was better able to focus and commit to paying the monthly amount.
I dug out of debt, and so can you. Step by step, you can become debt free and enjoy financial freedom.
My hope is that at the end of this year, you’ll look back and think:
“This was the year I finally turned things around and greatly reduced my debt.”
People crush debt every year, and you can, too.
As a simple first step, could you take your credit cards out of your wallet and put them in a safe place for now? Physically removing the temptation is a big help to me, and it might work for you, too.
Let’s Do This!
Saving money during the January Money Diet and applying it toward debt can be a powerful first step.
Today’s challenge is to make a plan to get your balances paid off, and commit not to take on even one single dollar of new debt this year. If you’re so inclined, we’d love to hear about your plan to pay off debt in the Comments of this post or over in the Money Diet Community Facebook Group.
If you’re already debt-free, perhaps you will tell us how you achieved that victory and how it has affected your life. We all love hearing your stories.
No matter what your circumstances are, I promise you that people in worse financial shape have gotten out from the burden of debt and you can, too. So let’s agree to attack debt head-on this year.
Here’s to real, lasting financial freedom in the days ahead. Together, we can do this!