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Debt Free: 3 Different Approaches

By: kjmena

Let’s see a show of hands.  How many of you are afraid to go to the mailbox?  Or put off checking your emails?  And you know the reason….you don’t want to see another bill come onto your already overflowing plate of debt.   But you know your debt is out there and oh so easy to forget, but it’s never going to leave until you become debt free.    

What doesn’t help is that we’ve been given the myth that there are two kinds of debt: the good and the bad…yet, even the good kind can get pretty ugly if not kept under control.  Becoming debt free is not as hard as you think. Lucky for all of us, there are debt solutions to become debt free.  


How To Become Debt Free


Debt: what to do?  The first step in debt management is being honest with yourself, acknowledging that you need “debt help.”   And, for some, that’s a mighty big step.  Owning up to it, bringing it into the light, makes the whole debt thing less scary.  It’s ignoring it that is creating the angst you feel every month.

Next, make friends with your debt; write it out, the total amounts due on each card or loan, the minimum payment requested each month, and the interest rate.  Own up to every amount on the MasterCard, and the Visa card, and the car payment statement, and maybe the money owed to Tom, Dick, and Jane for those months you didn’t have enough to pay the rent.   Knowledge is power!  Becoming debt free is gold.

Making Monthly Payments On Credit Card Debt

There are some basic ways to try to reduce your credit card debt by paying off one card at a time. These debt relief methods are for you to personally attempt to become debt free.  Paying one card at a time can be manageable for some debt but not all forms.

Paying Off the Card with The Lowest Balance

Rank your credit card debt in order from the one with the highest balance to the one with the lowest balance.

Take the card with the smallest balance and pay as much as you can; pay the minimums on the other cards.

Once you’ve paid off that first card, take that money you put towards it, and then add it to the card that you’ll pay next: the one with the lowest balance.

Continue this method until you have paid off all your credit cards.  Then, pat yourself on the back.

Paying Off the Card with The Highest Interest Rate First

Determine the most you can each month towards your credit cards.

To each minimum payment, add $10.

Now, add the amount you know you can, to the amount of the minimum payment PLUS the $10.

The two amounts should be similar; hopefully the amount of money you have to pay is greater than the amount of money with the ten dollar additional payment.

With the amount left over from paying the credit card payment plus 10, pay the card with the highest interest rate.

Staying debt free once your cards are paid off

Pat yourself on the back; you’ve done something that not many Americans have been able to do, either out of ignorance, procrastination, or being of those “out of sight, out of mind,” kind of people.  If you don’t open the bill or email, there is no debt.

But you’ve come out of the fog, up from the well, in from the debtor’s cold.  The next step is NOT going back.  Even though credit cards offer a real convenient way to make an emergency payment, like a new hot water heater, they should never be used for everyday purchases, like coffee, shopping sprees, or for immediate gratification.

Consider the following:

Budget Your Money:  Yes, it’s not a terribly exciting way to live, but when you come down to it, was being in credit card debt over your head exciting?  Instead, make notes of your monthly expenses, collect receipts, and then divide your spending into categories: food, entertainment, gas, clothing, etc.  Analyze what has to be paid each month and set that aside (don’t forget to put some into savings!), and what’s left can be used for those little incidentals, like movie out, or dinner in.

Get a Raise in Pay, or Find a Higher Paying Job: Expenses will always be increasing.  Heating costs, gas, phone charges will rise monthly, or yearly.  Don’t get complacent, and be accepting of a salary that is not keeping up with the standard of living.  If you are falling short each month, perhaps it’s time to talk to your boss if a raise hasn’t materialized yet, or look for a higher paying job.  Everyone does it, and it’s being pro-active rather than reactive.

Kick the credit card habit:  Make a promise to yourself to only use credit cards for emergency purchases.  Find cards that provide points or discounts to shops you visit regularly, or give gas points, or dollars off hotels, car rentals, etc.  If you have to use credit cards, use the ones that pay you back a little bit.  Always keep a few cards, though, since they help maintain your credit, and are needed to rent a car, or a hotel.  

  • Take the first step!