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The first thing you have to do is know where you’re starting from. Start with a basic balance sheet, or even just list out your debts, including balances and interest rates.
You know, a lot of people online are going to tell you to change your spending habits or to allocate your money better… and maybe you can! That’s up to you to decide. But if you’re among the Americans who are barely getting by, and putting groceries on your credit card, chances are it’s not a behavioral problem; it’s a money problem.
In my opinion, you have to start bringing in more income if you really want to tackle this debt problem. And this is where your creativity is going to have to come in. How can you make more money? Can you drive for Uber? Can you sell some electronics, clothes, or gear around your house? Can you start a side hustle? Mow your neighbors’ lawn? Can you tutor local students? There are so many ways to make a couple hundred extra bucks, and that money can help you make progress on paying down your debt. And in the age of the internet, it’s easier than ever to find opportunities and build multiple streams of income. And let’s be honest: if you want to survive, let alone thrive in today’s economy, you’re going to have to build more streams of income to help you get there.
The next step in this process is all about consolidating and restructuring your debts. The goal here is to pay the least amount of interest as you can. Many credit card companies will offer balance transfers for a low introductory interest rate. Again, this takes a level of creativity, but if you want to put this credit card debt behind you, you’re going to have to figure out how to get the best price for your money. Another idea is to consolidate your credit cards into one personal loan. A personal loan often has a lower interest rate, and depending on how many credit cards you have, it might be helpful at reducing your monthly payments. Another thing you can try is calling your credit card servicer and simply asking them for a lower rate.
So now that you know what your debts are and you’ve restructured things as much as you can, it’s time to consider how to prioritize your debts, by interest rate. You’re going to take all of those debts you listed out in step one, and sort them from highest interest rate to lowest. Now you’re going to make the credit card with the highest interest rate your number one enemy. The timeline here depends on how much debt you have and how much extra money you’re able to throw at it. The idea is that when your laser focused on getting rid of these high interest rate payments, you’re knocking down the principal balance on your card, and therefore paying less in interest every month. And from there, you just keep going. Once you’ve paid off the highest interest card, move onto the next, and keep paying those cards down.
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DISCLAIMER: I am not a financial adviser. I only express my opinion based on my experience. Your experience may be different. These videos are for educational and inspirational purposes only. Investing of any kind involves risk. While it is possible to minimize risk, your investments are solely your responsibility. It is imperative that you conduct your own research. There is no guarantee of gains or losses on investments.
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