One of the most important money milestones to achieve along the journey to financial freedom is to pay off your debt. This includes unsecured debt, like consolidation loans, student loans – and credit cards.
Paying off your credit card balances as quickly as possible can help you save hundreds – even thousands of dollars in interest. Here are some tips to help you destroy your credit card balances and eliminate debt.
Create or update your budget.
Budget your way to a debt-free lifestyle and see where and how you can adjust your spending.Compare your monthly expenses to your balances and determine how much money you can use to attack your debt.
Have $1,000 in emergency savings.
Having an emergency fund with at least $1,000 is essential to pay for unexpected events in cash, instead of using a credit card. Emergencies can include an unexpected medical expense, car repair, roof leak, etc.
A separate savings account is an easy way to keep your emergency fund out of sight and out of mind. Open a FAIRWINDS Emergency Savings Account and earn premium rate on the first $1,000 you save.
Put the brakes on using your credit card.
It’ll be tough to make progress if you’re adding to your debt during the payoff process. Instead, pay for your purchases in cash or use a debit card. Once your credit card balances are eliminated, continue to use cash or a debit card for purchases.
Pay more than the minimum.
In many cases, your minimum payment only slightly exceeds your monthly interest charges, leaving little to contribute toward your principle. If you’re only paying the minimum on all of your credit cards each month, it could take many years (or decades) to pay them off. Always make more than the minimum monthly payments to accelerate your debt-free payoff date.
Pay off your debt faster with the debt snowball method.
This includes unsecured debt, like credit cards, consolidation loans, and student loans.
Use our free debt snowball calculator to see how quickly you can gain momentum to destroy your debt.
Instead of taking the highest balance head on, pay off the smallest balance first. When your smallest balance is paid off, start making payments toward your next lowest balance, and keep repeating until all your debt is paid off.
Put extra income toward debt.
Tax returns, bonuses, raises, money from side hustles, garage sale earnings — you’ll want to spend these kinds of extra income wisely. They could be your ticket to achieving financial freedom. Quicken your payoff pace by using your extra cash flow to pay down your credit card balances.
Don’t go it alone.
Whenever trying to accomplish a difficult goal, it’s a good idea to have a dependable support system of trusted friends or family members. Not only can they keep you from veering off course, they can cheer you on along the way.
Where are you on your financial freedom journey? Find out now and take the FAIRWINDS Money Milestone Assessment. We’ll let you know which Money Milestone you’re on, what you’re doing well, and how you can make financial freedom happen sooner.