How To Pay Off Credit Card Debt

Debt is a horrible master. Nothing saps wealth like being in debt. Just take your monthly payments, add them together, then times it by twelve.

How much do you spend on debt?

Once you get the number go to this compound interest calculator. Set as the interest rate a reasonable rate (try 6%). Then set the years to the average length of a car loan (5 years), then take your monthly amount you spend on debt and add it to the calculator. Select the compound interval to yearly. What is the number you get? Image what you could buy or save if you paid off debt!

How do you pay off debt? Follow these simple steps:

1. Get the current balances for your debt accounts.
2. Throw the amounts and list in excel or Google spreadsheets.
3. Sort the list from smallest to greatest.
4. Add due dates, minimum monthly payments
5. Pay off the smallest amount ASAP
6. Take the minimum payment you were paying for the smallest balance and add it to the next smallest balance. Ex: Visa minimum is $50 per month, Master Card is $100. After VISA is paid off, apply th $50 to the Master Card monthly payment making it $150
7. Keep doing this until you reach your mortgage.
8. At this point I would apply half of what you were spending on consumer debt to pay off your mortgage faster!
9. Celebrate!!

How to Use Credit Cards

A better title for this would be How to Use Credit Cards Properly.

See depending on which personal financial expert you listen too, credit cards can either be a tool or a death sentence.

Many people would say that credit cards are useful for emergencies or to pay for large items. They also mention that the reward programs (airline miles) are alone worth using a credit card. They also mention that credit cards help build your credit for mortgages and other forms of credit.

The people against credit cards say that the hardships and cost of using credit cards outweigh the meager benefits. Credit cards, as the naysayers would mention, are a very expensive way to borrow money. They give people more funds to purchase things that they normally could not afford. They inspire bad spending habits. They would also say that using credit cards for emergencies is an expensive way to cover whenever one happens. One should have cash on hand for such things. According to them, you should always use cash to buy things, and that financing should be done with large ticket items, like a house.

Now, I see both sides pros and cons. Unlike the past having a good FICO (credit score) is a requirement for modern life. Some jobs require that you have a good FICO score to be considered for a job! Staying way from credit cards is really a personal choice. My goal is to give a guideline on how to use them if you decide too.

Guidelines:

• Pick a card with good rewards, low interest rate, and no annual fee. Cash back is my favorite choice.
• When using a credit card, make sure you have the money in the bank to cover the purchase!
• Some may say this goes against why people use credit cards in the first place. I do this because it keeps me from overspending and allows me to build rewards. You should only spend what you've budgeted!
• If you decide to use your credit card for everyday expenses then go for it. HOWEVER, make sure you don't spend the money in your checking account that you would normally use for the expenses. If you do, then you are spending way more than what you earn!
• Use YNAB to track credit card expenses. Make sure that every time you swipe the card, you deduct that transaction from the proper category. This keeps you with in your means.
• Know when the credit card cycle closes, when they charge interest on the balance. You want to use the money without paying interest if possible.
• If you decide to buy a large item on credit, have a special card that you use only for that purpose, and get ready to pay interest

These tips should help you prepare yourself when you use credit.