Most get-out-of-debt plans follow the same process. There may be some slight differences in how you execute your path to debt freedom, but generally, you’ll take these steps to pay off your credit card debt.
Start by making a list of all the credit card debt you owe. This will help put your debt in perspective and help you come up with a plan to pay off the debt. On your list, write the name of each creditor, the interest rate, minimum monthly payment, and total balance due. If the account is past due or with a collection agency, make a note of that, too.
Decide how much you’re able to pay each month toward your debt. If you don’t already have a budget, create one. Having a budget lets you know where your money should be spend and you can track your spending against your budget to see if you’re overspending in any area. If you have extra money in your budget, you can put this money toward paying off your debt.
Using your list of credit card debt, pick a credit card to pay off first. It might be the card with the highest interest rate, lowest balance, or one that’s about to be charged-off. Each month send all the extra money in your budget toward this one debt that you’ve picked to pay off first. Meanwhile, make the minimum payment on all your other debts. Once you’ve paid off that first debt, you can pick another one to pay off by sending in a lump-sum payment every month. Continue this process until you’ve paid off all your debt.
Getting the Money to Pay Off Debt
That’s the simple way to pay off your debt. More often than not, getting rid of your debt is more complicated than that. For example, you may not have extra money you can put toward your debt each month. If you find that you’re basically living paycheck to paycheck, take a close look at your spending to see if there are some places you can cut back. For example, you may prepare your meals at home more often or eliminate cable television. Look for ways you can cut back on each of the areas you spend in.
You can also look for ways to increase your income. With unemployment rates at such a high level, it may not be easy to get a second job. You may be able to make extra money in a few other ways, like creating income from a hobby, having a yard sale, or selling items on eBay.
If you can’t come up with the money to pay off your credit card debt right now, keep your plan in front of you so you can revisit it when you do have extra money. In the meantime, don’t increase your debt by making new credit card purchases.
Don't forget to let me send you future guides and tutorials. Just subscribe to the RSS feed, or just enter your email below; I'll make sure the updates are emailed to you.