5 steps (+ How to pay them off)

In this article, we’ll look at some specific steps you can take to find out all the debt you have and get a plan to pay it off.

Debt can come in many forms, so it’s important to know all the debt you have, regardless of the types.

The next important thing is to have a plan. Without a plan to pay it off, your debt will likely only get worse and you will continue to pay interest forever.

Find out how much you owe

You wouldn’t believe how many people don’t do this and continue to blindly pay any bill that comes in without a strategic plan. It’s one of the worst credit card mistakes. This is exactly what the credit card companies want because you are essentially just putting money in their pocket. One of the most important credit card rules is to keep track of your balances (aka your debt).

You can’t make a plan to pay off your debt until you know exactly how much you owe. Knowing the truth can be painful, but you have to bite the bullet. Then you will see that it is not difficult to end this bad habit.

In fact, you can get credit card companies to help. Look at their numbers on the back of your credit cards, call them, and put their answers into a simple spreadsheet like this one.

How much do you owe?

Credit card nameTotal amount owedAprilMinimum monthly payment

Congratulations: The first step is the most difficult. Now you have a definitive list of exactly how much you owe.

What debt should I pay off first?

Not all debt is created equal. Different cards charge you different interest rates, which can affect what you decide to pay off up front.

There are two schools of thought on how to achieve this. With the standard method, you pay the minimum amounts on all cards, but pay more on the card with the highest APR because it costs you the most.

With Dave Ramsey’s snowball method, you pay the minimum on all cards, but pay more to the card with the lowest balance first, which will allow you to pay it off first.

Prioritizing paying off your debt

SNOWBALL METHOD. MOST USERS FIRSTSTANDARD METHOD: HIGHEST APRIL FIRST
HOW DOES IT WORK?Pay the minimum on all cards, but pay more on the card with the lowest balance. After paying off the first card, repeat with the next lowest balance.Pay the minimum on all cards, but pay more on the card with the highest interest rate. After paying off the first card, repeat with the next highest APR card.
WHY DOES IT WORK?It’s about psychology and small victories. Once you pay off the first card, you’ll be more motivated to pay off the next one.Mathematically, you want to pay off the credit card that costs you the most first.

This is a source of heated debate in credit card circles. Technically, the snowball method isn’t necessarily the most efficient approach because the card with the lowest balance doesn’t necessarily have the highest APR. But on a psychological level, it’s extremely rewarding to see one credit card paid off, which in turn can motivate you to pay off others faster.

Bottom line. Don’t spend more than five minutes deciding. Just pick one method and do it. The goal is not to optimize your repayment method, but to start paying off your debt.

I saved over $3,000 and paid completed $3,000 by credit card debt The idea from snowball payments from the smallest card had the largest biggest influence on me mindset towards repayment of debt.

— SEAN STEWART, 31

Negotiate your debt in April

I’m a big fan of taking fifty-fifty odds if the drop is big, and it only takes about five minutes of my time. Accordingly, try to negotiate your April. It works surprisingly often, and if it doesn’t, so what? Just call your card companies and follow this script:

YOU Greetings! I am going to pay off my credit card debt more aggressively starting next week and I would like a lower APR.

WITH CREDIT CARD. uh why

YOU I have decided to be more aggressive in paying off my debt and so I would like a lower APR. Other cards offer me half of what you offer. Can you lower my interest rate by 50 percent, or just 40 percent?

WITH CREDIT CARD. Hmm. . . After reviewing your account, I’m afraid we can’t offer you a lower APR. However, we can offer you a credit limit increase.

YOU No, that won’t work for me. As I mentioned, other credit cards are offering me zero percent introductory rates for twelve months, as well as APRs half of what you’re offering. I have been a customer for X years and I would prefer not to change my balance to a card with a lower interest rate. Can you match other credit card rates or can you go lower?

WITH CREDIT CARD. I see . . . Hmm, let me draw something here. Fortunately, the system suddenly allows me to offer a shortened APR. It is immediately effective.

It doesn’t work every time, but when it does, you can save a lot of money with a five-minute conversation. Call, and if you’re lucky, don’t forget to recalculate your debt spreadsheet numbers.

I literally called my credit card company at the airport bookstore BEFORE I bought the book, read the script, and was able to negotiate a better April. And they even refunded the last few years of interest back to my account (only a few hundred dollars, but still). I bought the book seconds after hanging up the phone.

– CHRIS COLLETTY, 33

That first week I applied my script, then called my credit cards and my interest rate dropped from 18 percent to 11 percent.

— CHARLOTTE S., 35

The debt was terrible. It seemed like a cloud over me every moment. I started donating $100 more than the minimum and crushed the crap. I still have my “paid in full” notices.

— MATT GROVES, 31

Decide how to pay off your debt

One of the common obstacles to paying off debt is where the money is going to come from. Residual transfers. Should you use your 401(k) or your savings account? How much should you pay each month? These questions can be intimidating, but don’t let them stop you.

Balance transfers

Many start by considering a balance transfer to a card with a lower APR. I’m not a fan of these. Yes, it can help a few months and save you some money, especially on large balances. But this is just a band-aid for a bigger problem (usually your spending behavior when it comes to credit card debt), so changing the interest rate won’t fix it.

Plus, balance transfers are a confusing process fraught with tricks from credit card companies to trick you into paying more, and the people I know who do this end up spending more time researching the best balance transfers for than actually paying off their debt. As we just discussed, a better option is to call and negotiate an APR on your current accounts.

Withdrawing money from a 401(k) or home equity line of credit (heloc)

I do not recommend any of these options. You’re trying to reduce complexity, not increase it, even if it costs a little more. Again, there is a behavioral problem. People with credit card debt often struggle to cut back on spending and end up back in debt after using a 401(k) or HELOC. If you use your HELOC money to pay off credit cards, you run the risk of losing your home if you have more debt.

Cost cutting and debt prioritization

The most sustainable way to pay off credit card debt is also the least sexual. Unlike balance transfers or HELOC loans, it’s not very exciting to tell people you’ve decided to spend less on other things so you can pay off your debt. But it works.

May I ask a question. How much of every $100 you earn right now goes towards debt? Two dollars? Maybe $5? What if you pay $10 towards what you owe?

You’d be surprised that many people don’t even have to cut big expenses to pay off debt fast. They just need to stop splurging, become conscious of making debt a priority, and set up aggressive automatic transfers to pay off their credit card debt. Stop using credit card scripts to normalize debt and get serious about paying it off.

I don’t want to make this sound easy, because paying off your credit card debt is hard. But millions of others have.

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Start figuring out all your debt and paying it off

Remember the philosophy behind the 85 percent solution. the goal is not to explore every last corner to determine where the money will come from; it’s action.

Find out how much you owe, decide how you want to pay it off, negotiate your interest rates, and get started. You can always adjust your plan and amount later.

You’ll notice that I haven’t offered you a simple secret or a pretty voice on how to pay off your debt without a job. That’s because there isn’t one. If there was, I would tell you first. But to be honest, all you need to pay off debt is a plan and the patience to see it through.

It may seem like pure agony for the first few weeks, but imagine the relief you’ll feel when you see your debt getting smaller and smaller each month. And sometime after that you will be debt free. Then you can focus all your energy on getting ahead, investing, and living your rich life.

Being in debt means surrender elections means staying on the job you hate it because pays well money means not being able to build a decent savings account. My biggest mistake was without thinking about it the future and using credit cards to live beyond my means. I got it myself in debt my mid twenties from expenses, expenses, costs — and on silly things like clothes, food out movies etc. I learned my class and i am now live within my means on a tight budget that will let me be debt free in two years. All my debt is now on cards with APRs between zero and 4.99 percent. I have a baby but growing savings account, a 401(k) and program to: reach financial freedom.

— MELISSA BROWN, 28

Frequently asked questions about how to find out all my debts

How can I get a list of all my debts?

First, check your credit reports. On it will be a list of all debts for each account you have. It will include payment history, status and contact information for the creditor/debt collector.

How do I find out if I have outstanding debts?

Find out if you have outstanding debts with:

  1. Checking your credit report
  2. Check with your previous creditors
  3. Get contact information from your credit report
  4. Find out if any lenders or credit agencies have tried to contact you

Does the debt go away after 7 years?

For most states in the US, the debt does not go away or expire. You have to pay it. Debts can stay on your credit report for seven years, and in some cases even longer.

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