So part of the reason I revamped my blog to be more than just fitness is because I want to be a little more vulnerable & touch on real life topics that go beyond just healthy eating & workouts. This debt diary series is one of those topics & I’m not gonna lie, I’m a little nervous just typing this out because finances is one of the scariest things to share about!
But like I said, I want to be real & I want to provide you with content that will help you out in your life. I’ve asked Tylor for some help on this one, so a lot of the research & strategy behind this post is thanks to him!
There is also a FREE DOWNLOAD at the end of this post that allows you to pick the strategy that works best for you & plug in your own numbers to get started on taking control of your credit card debt!
To start, if you are reading this & are a twenty-something that is debt free – props to you & that is so impressive! But if you’re anything like us & like most young individuals or couples (married or not), you have some sort of debt… whether it be student loans, car payment, credit card, personal loan, family loan, wedding, etc & you want to pay that debt down as quickly as you can, & I want to help you create a plan that will get you there!
For our first year of living together, we were renting a one bedroom apartment a few miles away from the beach, it was our second year out of college & it really was just survival mode. We didn’t spend a lot of extra money, but we also weren’t able to save a lot. Moving to Oregon last year definitely helped us since cost of living was lower, but we also had a wedding we were planning & any extra money (& even money we didn’t necessarily have) went in that direction.
After all these major life events, we are so ready to take hold of our debt which includes my student loan, our car payments & some credit card debt, allowing us to set ourselves up to buy a house & put more money into our entrepreneurial endeavors.
With all of that being said, this post is going to explain 3 different ways to go about controlling your credit card debt & paying those down. Since student loans or car payments don’t necessarily negatively effect your credit score (sometimes it even helps to show that you have a consistent payment on a fixed interest), I want to focus this post on helping you pay off credit card or consumer debt (personal loans, things that don’t have an appreciated value such as a mortgage or other type of property).
These strategies all focus on paying down one balance at a time – so any extra dime will go towards that balance while your other accounts sit at a minimum monthly payment. Each of these ways has proven to be successful, but deciding on which you should use just depends on which one you think will work best for you & your situation!
The screenshots are meant to just be examples for you guys to see what it could look like!
1. SMALLEST BALANCE TO LARGEST BALANCE
This strategy works well if you have multiple little-medium balances spread throughout a handful of credit cards or loans. You would focus on your lowest balance first, placing any extra income each month onto that payment to pay it down as quickly as possible.
- this strategy works best for your personality if you like to “check things off your list” or achieve those little wins
- Snowball Effect: by paying off a full balance, you can then place those payments onto your next card or loan & you will now be able to pay off that amount a little more quickly as you don’t have the previous debt from your initial, fully paid off card or account. Once that second card is paid off, now that third amount will go quicker, etc (aka snowball effect 🙂 )
2. LARGEST BALANCE TO SMALLEST BALANCE
This strategy works well if you have a large amount on one card or account & then multiple smaller amounts on other cards or accounts
- chipping away on that one big balance will get that one large debt off your mind & help increase your score immediately
- focusing on a large amount will provide you with that one, large win after you pay it off completely – then you can pick the next card with the second largest amount to focus on & pay down, etc
3. HIGHEST APR (ANNUAL % RATE, AKA INTEREST) TO LOWEST APR
There’s a good chance that this approach will save you the most money in the long run as you are picking the highest interest rate account & focusing on paying it down while your lower interest rate accounts are just on a minimum payment.
- placing your main focus on paying off this high interest will allow you to be free of that high interest rate sooner
- once that highest interest is taken care of, now you can focus on the second highest, etc.
*these ‘balance after 6 months totals’ do not include interest rates incorporated into the totals – but are simply just a way to show how your balance decreases over the time
No one purposely gets themselves into trouble with credit card debt, but life happens & we may sometimes get stuck in this cycle of using credit cards over only spending what we have. There are moments in life where we are between jobs, or big expenses happen due to an emergency/unplanned situation & we catch ourselves stuck with this debt we never planned on.
Credit cards can be beneficial to our credit if we are able to control our spending & pay off the full amount each month, but sometimes when it goes too far, we feel like we can’t get out. I was definitely there in the past & that’s why I wanted to put this post together with this download. I hope these strategies help you take control of your financial situation!
Let me know if you have any questions, comments or what you think of the download!