Since August 2012, I have been writing on Debt Roundup about many different topics. They have all surrounded money and debt, because that is what I am passionate about. I have provided this information because I wanted to help those that are in the same situation that I was once in. I also wanted to show others that people make mistakes and that I am very much human. I am not perfect, nor do I pretend to be. I have been thinking about writing this post for some time, but just haven't pushed myself until now. I want to provide you with what I did to pay off my credit card debt.
How I paid off $50,000 - The Steps
There are many others that might have more or less credit card debt, but we all got into it for one reason. We spent more than we made. Simple and to the point. There might be many "reasons" why we get into debt, but it all boils down to spending more than is made. It doesn't matter if it is due to compulsive spending, medical bills, emergencies or anything else. If you spend more than you make, then you will be in debt.
I have written a few times about why I got into debt. There were many reasons, but it all boiled down to me spending more than I was bringing in. Credit cards allowed me to get things that I couldn't afford and charge it to my future self. If I had known what I know now, I wouldn't have gotten my first credit card in college. I would have taken the time to learn more about credit and use it in a wiser fashion. I can't take back what I did with credit, but I can use that failure to teach me what not to do.
Step 1 - STOP SPENDING
This one may sound easy, but it is by far the hardest. You have to figure out why you are spending so much money. I was spending in order to fund my business, along with just buying things that I didn't need. I was purchasing to satisfy my wants. It is time to figure out the difference between wants and needs. I took a hard look at my finances and realized that I needed a change. I shut down my profitable online business, stopped eating out, cut our cable and created detailed grocery lists. To this day, I still take my lunch to work as a way to eat better and save a lot of money. These are the things that I did to stop spending money. Beyond paying your regular bills, you need to figure out where the rest of your money is going and cut off the spending. It may be harsh, but it is important.
Step 2 - Pick Your Method
Once you figure out how to stop spending money, then you need to choose a debt payoff method. There are quite a few to choose from, but the two main ones are the Debt Snowball and the Debt Avalanche. If you want to know the difference, then check out my snowball versus avalanche breakdown. I chose the Avalanche method because it made mathematical sense. I used my emotions to get into debt, but I wanted to take them out of the equation. By using the Avalanche method, I was able to save thousands of dollars worth of interest payments. That was my emotional win.
Step 3 - Stay on Target
Welcome to the next hardest step. Paying down debt is not easy and it will usually take some time. We all don't have the luxuries to just pay off our debt in a couple of months. It will most likely take years. It took me 4 years to pay off my $50,000 worth of credit card debt. It took longer than some, because I saved along with paying down my debt. I worked hard to make sure I stayed on target. There are so many temptations that occur in everyday life, but you have to understand your goal. Do you want to be buried in debt or would you rather have financial freedom? I chose financial freedom. Don't be afraid to tell your friends or family that you can't do something because you can't afford it. You may not want to irritate your friends or family, but these are necessary changes. You have to do whatever you can to stay on target. I made some simple changes along with harder changes to make sure I stayed on my debt payment plan.
Step 4 - Make Extra Money
You can only save so much, so there might be many times where you just don't make enough money to accelerate your debt repayment. There are quite a few ways to make more money besides your full time job. I made money by selling things on Craigslist, selling on eBay and freelancing on certain projects via Elance and Odesk. I even picked up a part-time job at night after my full-time job. I worked hard each and every night to make a little extra cash that I could throw on my credit card payments. You have to think outside of the box when you are paying down debt. Think of something that you are good at and go see if you can make money from it. Don't spend money to start a side business though. That would be unwise.
Step 5 - Celebrate
Here was my most important step. Since we know that spending money is very emotional, then we have to create celebration moments. I took the emotional aspect out by using the Avalanche method, but you can't take it out entirely. So, in order to make sure that I stayed on my target, I created celebration steps. During times in my debt repayment, I would celebrate when I paid off debt to reach a certain level. If I paid off $5,000, I would go out and celebrate with my wife. Now, I wouldn't go on a spending binge, but I would go out to eat and have a beer. I paid for that in cash, so I wouldn't add it to my credit card, but it was important. Any times I would reach a new milestone, I would celebrate. This step kept me so motivated and allowed me to keep my head up. Debt likes to keep you down, so you have to make sure you figure out ways to keep your head up.
Alright everyone, now you have seen how I paid off my $50,000 worth of credit card debt. It was a long journey and a very hard one at that. I don't wish debt on anyone, but it has taught me a lot about myself and how I handle problems. I took my debt by the horns and rode it right out of my life. I don't plan on turning around and using my credit card frivolously, but at least I know that I have the tools to take my life back.
Do you have debt? If so, what is a step that you think is important to get out?