There was a time, not too long ago, that I was carrying a great deal of credit card debt, and I was paying somewhere in the neighborhood of 25% interest. I refuse to calculate how much money I paid in interest over the course of that card, but it was easily thousands of dollars.
Now that I’m out of credit card debt, and I will never, ever be in it again, I’m starting to think about the ways I could save money, and the various interest rates I could earn.
Absolutely none of my options (none! zero zip zilch nada!) will earn me 25%. Goodness gracious, my past self was an idiot. An idiot!
I need to save more money. Money magazine says that by the time a person is 30, they should have half of their salary saved for retirement. I’m simply not there yet. Even when I do max out my IRA for this year, I won’t have half my salary in that one account. I’ll have close to half.
If I hadn’t gone into credit card debt, then I’d be in a better place financially.
Listen up, though. If you carry a balance, you do not like your future self. That balance will not go away, and the credit card is earning so. much. money. on your money that you will never build wealth, buy a house, or ever retire if you do not rank and pay that sucker off immediately!
Cut corners. Do not eat out. Do not buy new things. If you have credit card debt, you cannot afford new things!
Here are a few easy steps to get out of credit card debt:
- Cut up your credit cards. Use debit instead. I know that you earn points or miles or cash back on your credit cards, but they are often a mental block, and you end up allowing yourself to spend more money than you earn. Debit cards do not let you do that. Some people say cash is best, but I disagree. Cash is a mysterious sink hole and you can easily forget how you spent the last $80.
- Sign up for an account with Mint. Or whatever. I like Mint because it’s pretty, and free, and secure, and easy. Enter all of your accounts. See where you spend the most money. Stop it.
- Use your debit card to pay the minimums on every loan.
- Put $1000 in your savings account. You do not want to end up with so little money that you stay in a relationship you should get out of. It does not matter how long this takes. Do this first. This is your emergency fund. Don’t touch it. I’ve found that my emergency fund is handy for the unexpected expenses — anything that you would have to use that credit card that you cut up to pay. Unexpected expenses have the tendency to completely derail you. Don’t let that happen.
- Now, go back to Mint. Snowball your debt. Dave Ramsey has built his career on this philosophy, but I’ll spell it out here as well. Pay off your smallest debt first. That means pay minimums on everything, except the smallest one. It’s a mind trick that shows your progress. So, you start to get on a roll, and all of a sudden, you have fewer accounts where you pay the minimum, and you feel lighter and lighter.
- Don’t get discouraged! This is going to take some time. There are, of course, ways to speed it up. Are you under 30 and a woman? Consider selling your eggs to infertile couples. Put every dollar toward your debt. Do you have the time to take on a part-time job? Do it. My little sister loves going out, so over the summer, she’s going to take a job at a family owned brewery in her town. She’s decided that everything she earns on her paycheck will go to her student loan debt, and every dollar she gets tipped goes toward fun money.
I’m still in this process. I’m tracking my spending, keeping a close eye on my budget, cutting out non-essential spending, and putting money toward my student loans. But I’m much nicer to my future self than I was a few years ago.