No matter your income, paying off debt is possible. If your cards are collecting dust or your annual fees are high, perhaps it’s time for a little house (or wallet) cleaning.
Six Steps to Managing and Organizing Debt
Step One: List out all of your credit cards and associated debt.
Review all of your statements and compile a list that includes the credit card, debt owed, required minimum payments and interest rates. As you begin your debt-free journey, this list will help you visualize and come to terms with the debt you need to address.
Step Two: Determine your oldest credit card and keep it open.
Opening multiple credit cards means your credit score has likely taken a hit and the credit repair process takes time. Even if it’s not used often, keeping a credit card open shows long credit history, which could help improve your score. Keep in mind that closing credit cards in general can hurt your score.
Step Three: Review your monthly spending habits.
Curious where your money goes at the end of the month? Create a monthly budget to track your spending habits. Even natural-born spenders can use easy savings strategies and cut back on expenses. Consider improving your home's energy efficiency, meal prepping or shopping smarter at the grocery store to help save money.
Step Four: Investigate consolidation options.
Gouging interest rates may be forcing you to pay more than your actual balance. If you have sizeable high-interest debt, transferring your outstanding credit cards to a new credit card could help you pay down debt faster. Use our quick tips to determine if debt consolidation is right for you.
Step Five: Create a payment plan.
Not laying out a clear debt repayment plan and strategy are common mistakes people make when paying off debt. Using the snowball or debt avalanche method gives you monthly payment plans with small wins along the way to help you stay motivated and avoid burn out. Try to pay more than the minimum and ensure bills are paid on time each month to avoid late fees.
Step Six: Build an emergency fund.
Home and car repairs, medical expenses and losing your job could happen at any time. Make it a financial goal to create an emergency fund to help prepare for these unexpected costs. Setting up a one-time monthly automatic transfer to your emergency fund can help hold you accountable.
Paying off debt is a long game, but you can achieve debt-free living with proper management and organization. Our members can take advantage of free access to individualized counseling, guidance and educational services through GreenPath Financial Wellness—a financial management program that can help with money management, debt repayment and more.
Federally Insured by NCUA.
