Credit card debt can hang around your neck and drag you down like a stone. It eats into your income and prevents you from saving for the future or spending your money the way you would like to.
If you’re earning enough income, you may be able to pay it all back without resorting to insolvency proceedings. With these budgeting steps, you can clear your debt for good.
#1 Make Your Debt More Affordable
Just because you’ve decided to pay back your debt on your own doesn’t mean that you can’t take advantage of programs out there that can help you do it faster and for less money.
A Debt Consolidation Program (DCP) is a great way to make your debt more affordable. With the help of a certified credit counsellor with a non-profit credit counselling agency like Credit Canada, you can negotiate lower or zero interest rates with your credit companies.
Making your debt more affordable will make it much easier to budget for, and you can expedite the process.
#2 Determine Your Must-Have Expenses
There are some expenses you can’t change, or not without making significant lifestyle changes, such as shelter, transportation, food, and utilities. Save all of your receipts and see where your money goes each month. Once you know how much you need, you can create a bare-bones budget.
Once you have that, you can decide how much you want or need to go to debt repayment and how much goes toward discretionary spending.
#3 Make More than Minimum Payments
When you only make minimum payments, you keep your account in good standing, but it’s the most expensive and longest way to pay it all back. Minimum payments are made to maximize the amount of money the credit card company can get out of you.
#4 Create a Timeline
You’ve committed to making more than minimum payments, but how much should you pay? That depends on when you want to get out of debt. Pick a date that you want to be debt-free. Then use a debt repayment calculator to figure out how much you have to pay to get it done.
From there, you know what you need to do. It might be getting a second job or a side hustle. It might mean adjusting your expectations. But it gives you a clear plan.
#5 Stop Forgetting Bills
One of the worst things you can do is forget to pay a bill that you have the money for. When you’re juggling multiple bills and overdue notices on top of all the regular stress of work and life, it can be surprisingly easy to forget about something.
There are several ways you can make sure you never forget to pay a bill again:
- Automate bill payments if you can reliably afford to pay the balance in full every month
- Pay bills as soon as you receive them instead of putting them off
- Set alerts on your phone or write down in your agenda when bills are due
- Consolidate all of your unsecured debts, so you only make one payment
Budgeting your way out of debt is possible, but it can take some planning. Don’t be afraid to do yourself a favor and take any steps you can to reduce the total costs.
Krishna Murthy is the senior publisher at Finance XOD. He is not only the senior publisher but also the owner of Tricky Finance. Krishna Murthy was one of the brilliant students during his college days. He completed his education in MBA (Master of Business Administration), and he is currently managing the all workload for sharing the best banking information over the internet. The main purpose of starting Tricky Finance is to provide all the precious information related to businesses and the banks to his readers.