Credit card debt… Many people have it, few people love it. And even fewer people rid their lives of it using their current income. After walking through these five steps, you too will feel that sense of relief once that outstanding balance is gone.
As a child, I use to watch my mother “balance her checkbook”. It was one of my favorite past times with her. I loved to see her write down the numbers on her notepad, calculate them, and arrive at a large 4- or 5-digit number. I thought we were rich!
Well, as the years passed, she would explain to me the categories of her budget and their totals. Those large numbers I was so excited to see on a monthly basis was outstanding credit card balances.
As I reflect on these memories, I understand now why I was so “afraid” of owning a credit card as a young adult. I feared that I too would be sitting at my kitchen table stressed over unpaid credit card statement balances every month.
I now own a credit card and I use it very responsibly. I have yet carry over a statement balance from one month to another – and I plan to keep it that way. However, I have worked with many clients who have trouble with paying off their credit card debt. So, I gave them the following 5-step advice and they have paid it off using only their current income:
Step One: Cut up the credit cards.
Cut up the credit card that holds the outstanding balance you are planning on paying off. By cutting it up, you can no longer use the card and increase the hole you are trying to dig yourself out of.
NOTE: Do not close the credit card account – just cut it up for now. You can reorder another one if and when you have addressed your poor spending habits and learn how to properly use the credit card as a tool to enhance your financial health.
Step Two: Pay cash for all expenses.
Since you are trying to pay off credit card debt, do not prolong your financial freedom by accessing the credit. Instead, pay cash for all of your monthly expenses.
At this point, you should have an emergency fund savings account AND a monthly budget established to stay current on all monthly expenses as well as financial emergencies. If you have not established these, you are not ready to begin the credit card repayment process.
Step Three: Temporarily remove all luxury expenses from your monthly spending plan.
Look over your monthly budget and cut the expenses you can temporarily live without. This includes dining out, large cable bills, and your monthly gym membership. This is a key step because you are freeing up on average $100-$500 a month to put towards the credit card balance.
The more expenses you remove from your budget, the faster you will pay off your credit card debt!
Remember, this is a temporary. Once you are financially free, you will be able to reintroduce a few luxury expenses back into your budget.
Step Four: Begin the credit card debt repayment process.
Click here to access the debt repayment plan that helped me pay off thousands of dollars. When I began my journey to financial freedom, I tried numerous debt repayment plan templates. The only one that helped me pay off more than $26,000 of debt was this one.
Step Five: Reflect on lessons learned from this process.
The most important step in the credit card repayment process is reflecting. Before you reorder your credit card, grab a cup of tea, find a quiet place, and reflect. Ask yourself the following questions:
How do I feel now that this credit card balance is paid off? (Relieved? Proud?)
How should I use handle this card going forward so I do not get back into credit card debt?
What am I going to purchase with my credit card each month?
What am I NOT going to purchase with my credit card each month?
If you want to rid your life of credit card debt, you must remain steadfast through the process. These 5 steps will help you pay your statement balance to $0!
Question: Have you paid off any outstanding credit card balances recently? If so, how did it feel to see a $0 statement balance? You can leave your response in the comment section below.