Monthly Credit Balances: How To Pay Them Off Quickly
Living off your monthly income solely is hard.
Long story short, it’s not always sustainable. The thing is, our wants are always limitless. And right before our eyes, we can watch our expenses exceed our income if care is not taken. For this reason, we run to credit cards for safety. At least, they allow us to make purchases we normally can’t afford. And evokes a temporary but exciting feeling.
In no time, we get deeply involved in debt, and we can’t just seem to break free.
If this is you or you are on this troubling path, then fret no more! In this article, I will provide proven, step-by-step advice on how to clear your credit card debts and live a debt-free life.
The truth is: only a few articles online dig deep or provide a step-by-step approach to paying off your monthly credit balances and living a debt-free life. Therefore, I took this upon myself.
Here is what I came up with:
1. Review your current budget
Unlike most articles suggest, reviewing your budget is the first step towards becoming debt-free. Your budget entails your income and expenses. Hence, developing a realistic budget and sticking to it is a great first step to becoming debt-free.
The truth is, you will find it hard to clear your credit card debts if you do not contain your spending and stick to a budget. As a result, it’s advisable you cut unnecessary expenses.
Let’s imagine a scenario, for a second. Let’s assume you earn about $4000 a month, and your monthly expenses average about $3,500 to $4,000.
First, admit the fact that you are not living within your means.
Second, list out your expenses and rank them based on the order of priority and importance. Take, for example, if the expenses you incur per month are 30 in number on average, you can rank them based on importance and priority from 1 to 30. This way, you are able to filter out the less important expenses and prioritize the most important ones.
Third, filter out the highly unnecessary and relatively costly expenses, freeing up some cash to pay off your debts.
2. Create A New Budget
Now you have decided on what items and expenses to cut out, you can then proceed to develop a new budget.
Developing a reasonable budget is somewhat tricky. You basically do not delight in living by a dull, dry and unenticing budget, nor do you wish for an expensive one.
Hence, you’ve got to find a sweet spot. A budget in between the two extremes. But then, in the end, you’ve got to create a budget you can stick with.
Take, for example. You might add one or two ‘unnecessary expenses’ to spice things up and reward yourself for sticking to your budget. For instance, you might plan a picnic with your loved ones.
Now you have a new budget, I suppose there would be a massive discrepancy between your average income and expenses. Hence, you will have some funds left to pay off your debts or, better still, save for a rainy day.
3. Develop a Debt Repayment Plan and Stick With It
There are two ways you can go about this. You can either employ one of the two approaches below:
* Focus on the Smallest Credit Balances First
This approach might be ideal for you if your debt seems too large to pay off and distributed over different credit cards.
By paying off your smallest balances first, you feel confident about clearing the debt in no time.
This approach is known as the Snowball Method of Debt Repayment.
* Focus on the High-Interest Debt
This approach is best if you possess several debts due for payment. Following this approach, you pay off the high-interest debt first, which is often the long-due credit card balance. This way, you can mitigate the interest you will pay in the future.
This approach is known as the Avalanche Method of Debt Repayment.
4. Pay More Than Required
BNPL companies and lending financial institutions are in the business of making money. As a result, they try as much as possible to earn off of you when you pay less than you should.
For this reason, it’s a lot better when you pay more than the minimum your credit card issuer recommends each month. And, of course, this approach allows you to clear all your debts in no time while incurring a reasonable interest expense.
5. Make Use of a Balance Transfer Credit Card
If you are lucky enough to qualify for a balance transfer credit card, you can give it a try. It allows one to transfer debt from high-interest credit cards to a balance transfer credit card, which typically offers no interest for two years.
These credit cards offer a 0% introductory balance transfer APR for a given period.
Hence, financial advisors recommend paying off your balances before the interest-free introductory period ends.
Also, there is a slightly bad side: they may charge you a balance transfer fee when transferring the debt from other credit cards. Aside from that, it’s a go-to approach when it comes to paying off your credit card debt. However, if your total debt exceeds the credit card’s limit, consider another payment option.
For more information, learn more about balance transfer credit cards.
Final Thought
Paying off your debt is no easy task. It entails a lot of sacrifices and hard work. Most importantly, you must put your spendthrift nature on the line and embrace frugality to get the most out of your debt repayment strategy. Once you embrace this mind shift and take action, you are on your way to freedom.
My best wishes are with you as always.
Love, Daniel.
