There are few things in life more spirit crushing than significant financial debt. The constant fear of family and coworkers discovering your shameful secret taxes your energy. Not to mention the hopelessness you feel as your situation spins out of control with outrageous interest payments and additional fees. Then there is the dread of opening your statements every single month.
I know this with certainty because I experienced it in my twenties just as many of my friends did. But rather than running up my own bills, I had unknowingly married into 40k in credit card debt. Ouch! And rather than bail on the new marriage, in spite of the King Kong sized red flag, I chose to stay and help my future ex-husband pay off this enormous liability. What can I say? Love is blind.
Admittedly, this is an unusual way to fall into a money pit. However, whether it’s from reckless spending or a medical situation or a divorce, debt is debt. It is the thief of dreams and opportunities, and I loathe it. So we formulated a plan to knock out this balance within two years.
As ridiculously lofty as that goal sounds, keep in mind that forty thousand dollars back then is about sixty-three thousand today. Now we’re talking crazy ambitious, right?
Given our household income was approximately sixty thousand dollars per year, we knew the cuts in expenses would be drastic and uncomfortable. Even so, we pressed forward and managed to wipe out our obligations in twenty-four months. Do you want to know how?
1. Food and Drinks
For the sake of being thorough, I will include a few ‘no-brainers’ within my list.
Re-gift presents you don’t use. I know it stinks. Do it anyway.
Use mail-in rebates. They are time-consuming but worth it.
Apply to reward programs from every chain that offers them. It adds up.
Browse garage sales and thrift stores instead of buying new.
Don’t take kids/grandkids to the market. Just don’t.
Shop on clearance. You can find sale items on the end caps of aisles.
3. Entertainment
Eliminate date nights out. Have romantic meals by candlelight at home.
Check newspapers, Pinterest & websites for calendars of free events in town.
Go camping, on day hikes, or take staycations instead of vacations.
Invite friends over for drinks and food instead of going out.
4. Slashing Monthly Expenses
Stop frequenting hair & nail salons. I hated this one but did it.
Cancel your gym membership or exercise class. Workout at home.
Shop around for the best gas prices. You can use gasbuddy.com.
Re-finance your home and/or auto loan.
Drop your cable provider. Tell yourself, “It’s a want, not a need.”
Bundle your insurance coverage.
Temporarily stop contributing to retirement. (It is a personal choice)
**** I did not borrow from my 401(k) to pay off debt****
5. Fundraising
Have a yard sale. Borrow someone else’s yard if needed.
Take paid surveys.
Offer to sell items for friends & family on eBay or Craigslist for a fee.
Pawn old jewelry or tools.
6. Credit and Banking
Use auto bill pay to avoid late fees.
Change banks to reduce checking & ATM fees.
Use cash or debit cards instead of credit.
Transfer high-interest balances to low, introductory rate credit cards.
Cut up all but one credit card to use only in an emergency.
7. The Difficult Stuff
Temporarily quit school. No sense in digging a deeper hole.
Eliminate hobbies like tennis, golf, skiing, & other activities with high participation costs. Yuck!
Go down to one car if you have several and use car pooling/bus to get to work.
Don’t plan on vacations that require flights and hotel stays.
Downsize your home.
Well, those are the painful methods I used to erase 40k in credit card debt quickly. Implementing these tactics was frustrating at times, but ultimately successful. I vividly remember sending off the last instalment. There were tears of joy in my eyes and pride in my heart. Trust me; it was worth the sacrifices.
Have you ever experienced crushing debt? If so, do you have any suggestions on how to pay it down rapidly? Please share your tips in the comment section below. Life is better when we lift each other up.
About the author:
Jen Monks is a business writer, serial entrepreneur, and steadfast optimist devoted to helping women over forty create companies and encore careers they love.
Outside of bankruptcy or debt settlement, there are really no other ways to completely wipe away credit card debt without paying. Making minimum payments and slowly chipping away at the balance is the norm for most people in debt, and that may be the best option in many situations.
The "snowball method," simply put, means paying off the smallest of all your loans as quickly as possible. Once that debt is paid, you take the money you were putting toward that payment and roll it onto the next-smallest debt owed. Ideally, this process would continue until all accounts are paid off.
Anything over 30% credit utilization will decrease your credit score. So, you can use this as a measure of when you have too much debt. Consolidated Credit offers a free credit card debt worksheet that makes it easy to total up your current balances and total credit limit.
It will take 47 months to pay off $20,000 with payments of $600 per month, assuming the average credit card APR of around 18%. The time it takes to repay a balance depends on how often you make payments, how big your payments are and what the interest rate charged by the lender is.
While there are no government debt relief grants, there is free money to pay other bills, which should lead to paying off debt because it frees up funds. The biggest grant the government offers may be housing vouchers for those who qualify.
Pay off your debt and save on interest by paying more than the minimum every month. The key is to make extra payments consistently so you can pay off your loan more quickly. Some lenders allow you to make an extra payment each month specifying that each extra payment goes toward the principal.
Tips to Negotiate with Creditors on Your Own. It is possible to negotiate directly with creditors and settle your debt for less than you owe, but you may want the help of a professional. A quick counseling session from a certified credit counselor can help you discover your options and choose the right path forward.
1% of the balance plus interest: It would take 29.5 years or 354 months to pay off $10,000 in credit card debt making only minimum payments. You would pay a total of $19,332.21 in interest over that period.
If you received a Pell Grant in college and meet the income threshold, you will be eligible for up to $20,000 in debt relief. If you did not receive a Pell Grant in college and meet the income threshold, you will be eligible for up to $10,000 in debt relief.
1% of the balance plus interest: You would pay off $5,000 in 285 months. That means it would take nearly 24 years to eliminate your $5,000 balance if you only make minimum payments. During that time, you'll pay a total of $9,332.25 in interest for a total payoff cost of $14,332.25.
1% of the balance plus interest: It would take 29.5 years or 354 months to pay off $10,000 in credit card debt making only minimum payments. You would pay a total of $19,332.21 in interest over that period.
If you can pay $100 a month, it might take you 25 months to pay off the debt. If the card has the same APR but an annual fee of $100, it might take 29 months. And if you can pay $300 a month for a 20% APR card with a $100 annual fee, it might take you 8 months to pay off $2,000.
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