Pay Off Your Credit Card With These Five Steps

If you’ve been out of work for a while and you’ve been living off credit you might have accumulated some debt. Once you start making money again and are ready to pay it off don’t fall into the trap of paying the minimum month after month, while you put money toward other things.

 

With interest rates of 15%, 19%, 22% all the money you don’t put directly toward that card is adding to your interest payments.  Essentially you throwing money out the window. Money you could be putting toward something useful.

 

If you don’t have a plan for paying off that credit card debt then essentially you are simply hoping you’ll be able to pay it off.

 

Stop hoping and start take control of that debt. Here are five steps to do it!

 

5 Steps to Pay Off Credit Card Debt Fast

Time to Pay Back Student Debt?

Time to Pay Back Student Debt?

My son Matt just finished his master’s degree in education. Last week we got the diploma in the mail. Today we got the letter from student loans detailing his payback schedule – including interest accrued before the repayment date event starts!

 

According to an article about student loan debt from Forbes, student loan debt in 2019 is the highest ever. “There are 44 million borrowers who collectively owe 1.5 trillion in student loan debt.” It’s so rampant that student loans make up the second highest debt category – right behind mortgages!

 

Debt across the ages

The student loan epidemic isn’t only a problem for people just out of school. It wouldn’t surprise anyone to hear people in their thirties are still carrying student loan debt, but according to the above Forbes article, the largest increase in student loan debt comes from people in their sixties.

 

Depending on whether the student has a private loan or a federal one the interest rate will vary. My son has a federal loan so his interest rate is about 6%. His loan is for $7, 220. Luckily, it’s not huge. If he does nothing but follow the payment schedule provided by the loan office he will pay just over $80 a month for 114 months to pay it back. At that rate he will end up paying a total of $9,489 – an extra $2,269 in interest. Almost an extra third!

 

Obviously the higher the loan, the higher the accrued interest -but none of us is doomed to be a statistic.

 

Pay bi-weekly

Whether you have a student loan or some other outstanding debt, a painless way to make an extra payment a year is to pay your loan twice a month instead of once. We’re not saying to pay more (although yes, we do want you to pay more – but more on that later), what we are saying is to divide your payment in half and pay it every two weeks instead of once a month. As I said, Matt is supposed to pay $80 a month. If instead of doing that, he pays $40 every two weeks then over the course of a year he will have made 13 months of payments rather than 12!

 

Get high interest loans out of the way

If student loans are not your only debt, you need to prioritize yourself. Figure out which debt is costing you the most in interest every month. Make the minimum payments on everything then clear through the one that’s costing you the most first. Once you’re finished with that move on to the next one.

 

Review your budget

The payment amount set by the loan office for Matt is $80, but of course the more Matt pays the faster he dispatches the loan and the less interest he pays as he goes and overall. Matt’s first priority is to assess his budget. He needs to figure out much extra he can put towards that loan on a monthly basis and where that money will come from.  That might mean taking his lunch to work more often or riding his bike instead of taking public transit. It might mean he decides to move back in with me for a while to put that rent money toward the loan.

 

Student loan repayment benefits

To help deal with the overwhelming problem of student debt, many companies offer student debt payment assistance as part of their benefits package. Some will simply put money toward your debt on a regular basis, others will match payments made by the employee. Here are a few examples. A little research will help you track down more!

Make The Most Of Your Tax Refund

Make The Most Of Your Tax Refund

New to full time employment your first tax return might seem like a huge windfall so you may be inclined to treat it like found money and blow the whole thing on a vacation or a no-holds barred shopping spree. The average tax refund in America is $3,000 – a lot to play with. But  you need to remember, this isn’t found money or won money. This is money you earned through the year finally arrived in your account. You worked hard for it, now it’s time to make it work hard for you.

 

Pay down high interest debt

Do you still have student loans outstanding? Here’s a great way to make a significant dent there. What about credit cards with high interest rates? Instead of making small payments and continuing to carry a high interest rate month like 15%, 18% or 22% after month, vanquish the beast or at least cut it down to size in one fell swoop.

 

The money you save not paying that interest month after month is money you can put towards other things.

 

Prepare for emergencies

The other smart thing you can do with that money is either start an emergency fund or add to it. Ideally you want to have about three months worth of living expenses socked away to carry you through unexpected situations. Having an emergency fund will help save you from incurring that credit card debt or line of credit to deal with emergencies in the first place. It also preserves your retirements savings – for your retirement.

 

Invest in your future

Speaking of retirement, according Dave Ramesy’s 40 With No Savings? “The employee Benefits Research Institute reports that 37% of all employees age 35 – 44 and 34% of employees age 45 – 54 have less than $1,000 saved for retirement.”

 

The earlier you start, the more the money you invest today will be worth down the road. No matter how far away the future might seem, all of us will get there much sooner than expected. The more you can put away before you arrive, the rosier it will be when you get there.

 

Aside from adding to (or starting your investment income) other ways of investing in your future include investing in yourself. Are there any courses you want to take to prepare for a business venture you want to start? Are there materials you need to buy to get you started with that new Etsy business you’ve been thinking about? Think of your return as seed money to grow tomorrow’s projects.

 

Do something for yourself

If you are not in debt and you’re comfortable with where you are financially, then absolutely give yourself a treat! Even if you need to use the money for debt or investment you could still take a portion of the return to treat yourself. 10% maybe.

 

Or, instead of treating yourself maybe you’d like to use that money to donate to a cause or organization that means something to you. You help others and as a side benefit you come away feeling great about yourself. The ability to help others is one of the wonderful things money can buy. If you’re not exactly sure where to donate check out Give.org to ensure your money is going somewhere you can believe in.