Try to snowball your debt, and be debt free before you know it!
Are you drowning in minimum payments? Do you have lots of credit cards with balances and huge interest rates? When was the last time you really sat down with these bills to figure out when they would be paid off?
You are not alone. Life gets so busy, we need this or that, we keep throwing our credit card out there to keep life ticking away, and then we use that same credit card to make ourselves feel better at the mall or restaurants, takeouts or nights out.
But here is the deal. If you use your credit card for consumables, such as eating out, or going to the movies, and you don't pay it off when you get the bill, you will actually be paying triple by the time you get around to paying off that dinner you ate months ago maybe more depending on your interest rate!
So, think about that, the next time you whip out that credit card that is not getting paid off. If you are just paying the minimum balance, and you keep charging, you will hit the max, and not be able to use it, and you will be effectively on the "never never plan" as my dad used to call it. Meaning you will never get this card paid off! Especially if you are looking at interest rates of 28.8% or higher, you will end up paying off 100 dollars just in time to charge another 100 dollars.
The credit card companies, will be getting their pockets lined in interest from those dinners out and that great pair of shoes you got last year, and have now thrown out! Is that what you want? Not likely, but how do you get on top of this debt? You snowball your debt.
You can do this, you just have to make this chore important enough to spend an evening or a Saturday afternoon working on it. I find the weekend a better time, because the evenings you are tired from work, and running kids to practice etc. You need to be able to sit down, put on a pot of coffee or tea, and really take a good look at who you are paying all your money to, how much, and what you can do about it!
When you use your credit card and don't pay it off, you are effectively using some other guys money basically.. and he will want to be paid for the use of it. So, think a bit harder before you use that credit card again, especially for food out, entertainment and more.
You need to just have one credit card in your wallet and it will be for EMERGENCIES! like a breaking car or medicine.. not for shoes on sale or an all night buffet!
If you have to take a couple of sessions to get everything together, because it is all over the house, then that is fine. The fact you are even starting to do this, is a step in the right direction and you deserve a pat on the back for it. To snowball your debt, you have to have all your statements and know what you are dealing with.
Once you have spent a day gathering all your bills, now you need to get out a pad of paper and list all the creditors. The Visa's, the Master cards, and the Department store credit cards.
Now write them down as a list, and beside each one, write the balance owing, then the minimum payment required to pay. Then write down the interest rate. It will be on your statement somewhere.
Hopefully you get over the shock of seeing it written down, now you need to take action. Unless your credit card is a really high balance, you should be aiming to get rid of credit balances on cards in 3 years. If there is no way you can do this, then you should talk to a bank about a consolidation loan. If you can do it in 3 years, then get rid of the debt yourself.
Take the balances on each card and divide by 36 months (3 years) then add up that column, and now you have to find that money each month to pay these cards. Divide this total by the number of pays in your month (probably 2) and pay the cards the same amount each pay. You will get used to it, and of course STOP using the cards.
But where the snowball your debt comes in, is as each card or debt is paid off, you take that same payment you were paying them and add it to the next card in line. You don't put that money back into the general budget or it will find a home. You have got used to paying this amount so keep paying it.
Now that second card is getting extra, and should be paid off quicker, then add that payment to the next one. This is how to snowball your debt.
Many financial guru's will tell you to always aim for your higher interest debt first. This is good advice, but with us being emotional humans, I find it personally satisfying to pay off the smaller debt as fast as I can, so that I see progress and then snowball that payment to the next one.
If you owe $5000.00 to one card and only $500.00 to another, and the larger amount is also the higher interest rate, you technically should be paying as much as you can on that larger debt, and not as much towards the smaller one.. You are more likely to stay on track if you can see success. By paying off that smaller one first, you will feel good, like you accomplished the goal, and can snowball your debt with that payment towards the larger debt.
Take a little time now, and your future will look rosier!