How I Paid off $100k in Debt
The average Millennial College Grad has $8k in credit-card debt, $28k in Student loan debt and $14k in car loans. That amounts to a total of $50,000. Most post grad Millennials are earning an average of $35k a year, and paying a minimum of $830 a month on that $50k. At that pace it would take 6 years to pay off the car, 10 years for the student loans, and 20 years on the credit card!
Here’s the kicker; you will pay a total of an extra $1,171 on your car, $8,500 on your credit card and a whopping $10,666 on student loans in interest!!! So your $50,000 actually costs you $70,337.
I WAS THERE
When I got married, life was good. I had a good job and was doing well.
Then the economy tanked! My house went into foreclosure; I had two car loans, a personal loan of $11,000 and over $10,000 in medical bills.
I was a total of $100k in debt, and my income was going down with the economy. How was I going to pay this off?
What I Did
Desperate times called for desperate measures. First I created and stuck to a budget. Check out my previous Blog on Budgeting.
Next, I made a pay off plan. Now if you make your budget and find out you are in the negative each month, you can do one or both of these two things (I did both):
· Cut back on expenses, and/or
· Make more money (Subscribe to my Newsletter to get notified when I post on how to make more money)
Make a Pay-off Plan
Stop accumulating more debt! RIGHT NOW! You can’t pay off debt and continue to use your credit cards.
Implement the Snowball Method
If you only pay minimum payments, you will pay the maximum in interest and prolong the payoff. In order to speed up the process, you need to dedicate some extra money each month towards your payments to get ahead of the interest. Take whatever extra money you have each month and put it towards the payment on the highest interest debts first.
Once that debt is completely paid off, take the payment amount that you were using to pay off that debt and add it to the monthly payment your next highest interest/lowest balance debt and so on. You will notice that as you keep paying off your principle balances, the debt starts getting smaller and your payments grow like a snowball rolling down a hill. By adding $100 to your monthly payments and utilizing the snowball method, you will pay off your debts in 5.5years instead of 20 and save over $10,000 in interest payments!
You can keep track by using a debt payoff app like Debt Payoff Planner. Paying off your debt can take a few months or a few years. This app is just to keep you motivated to your payoff plan by calculating how much you save as you pay off your debt.
If you read my blog on budgeting, then you have already automated your fixed expenses. That way, you swipe your card only for the non-bill expenses. Do the same for your debt payoff plan: automate your payments and amounts. If you have additional money each month to put towards your debt, make an additional payment BEFORE your due date to reduce the amount of interest that accumulates.
Follow this debt payoff plan and watch your debt go down much faster than you think possible!
Comment below with any questions, and tell me what Millennial Survival skill you want to learn next.
Orignially posted on my blog at www.therealnickmorrow.com
