Be honest, how long have you been thinking about reducing debt? A few weeks? A few months? A few years?
Now think back to the first time you expressed a desire to get rid of debt. Have you made progress and paid off (or paid down) some of your balances? Or have your balances remained the same or increased?
Part of the reason we accumulate debt is that there are so many pretty, shiny things— things we want to buy but don't need.
But we also ring up debt because we simply don't understand the our income and expenses (budget), so we can't know how much money we have available to spend. Get the Be A Money Boss Budget Workbook Here.
Researchers found that people estimate their credit card debt to be 40% less than what lenders report. You aren't alone. According to the American Household Credit Card Debt Study, the "average U.S. household with debt carries $15,762 in credit card debt," and a recent Google Consumer Survey found that "approximately 62% of Americans have less than $1,000 in their savings accounts, and 21% don't even have a savings account."
How you pay off debt matters if you want to get out of debt quickly. Unfortunately, most people are doing it wrong.
Let's assume you have a credit card with a balance of $2,500 with an APR of 19.99%. Your minimum payment is 4% of your balance each month. If you pay only the minimum payment, it will take you 9.42 years to pay it off, and you will pay $1,630.59 in interest.
Don't just wing it. Which card (or cards) you pay down first can make a big difference in how long it takes to get out of debt and how much that debt ends up costing you. It turns out that most people are using a repayment strategy that takes longer and costs more than necessary.
"Show me your friends and I'll show you your future". Get your friends involved and do this together.
Let's say your credit card balance is $8,000 and your interest rate is 18%. If you make only your minimum required payment each month, it would take you 320 months — or 26+ years — to pay off your debt. And during this time, you'd pay more than $11,420 in interest.
Being single, I mean debt free, is wonderful!
- You have the freedom to work less.
- You can retire earlier.
- You can build your savings accounts.
- You will become a smarter spender.
- You will have less financial anxiety.
What's the motivating force driving your desire to reduce debt?
- Do you want to set a good example for your kids?
- Do you want to buy a house? Travel more? Start a business?
For a lot of people, "next month" is always the best time to start. Every day you wait adds more interest to your debt. If you’re reading this blog it means you’re serious about paying off debt.
Act now and take advantage of your current momentum.