60 Second Credit Card and Debt Reduction Plan
June 25, 2011 | By Steven DiGregorio
One of the smartest financial moves you can make now is to pay down your credit card debt. Credit card companies have always been notorious for high interest rates and fees. The passing of the 2010 Credit Reform Act then caused issuers to raise rates even further, though limiting some of the fees that were charged.
The problem is, once you are trapped in the cycle of making credit card payments, it can be difficult to get out. Worse, the interest that you pay on your credit card balances goes straight into someone else’s pocket! Interest paid for the privilege of borrowing money, offers you no other benefit. It’s a pure expense.
Credit Cards & Debt
If you want to improve your finances, and move along the path to financial freedom faster, it is best to pay down your credit
card debt as quickly as possible. Creating a debt pay down plan can seem a daunting task, but it doesn’t have to be. You can put together a credit card debt reduction plan in 60 seconds or less:
- List all of your credit card accounts: Make a list of your credit card accounts, jotting down your current balance, the minimum payment, and the interest rate. When I did this my list followed this format: BOA Visa – $2,500 – $75 – 9.99%. (16 seconds)
- Figure out which order you want to pay them off in: Number the creditors in the order you would like to pay them off. This can either be by starting with the lowest balance, or by starting with the highest interest rate. Paying of the high interest card will save you money in the long run, but there is something to be said for the emotional boost that comes from starting with the lowest balance and paying something of quickly. (7 seconds)
- Decide how much you can pay toward debt reduction each month: Review your monthly budget, including all expenses. This can be done quite quickly if you have personal finance software or use an online banking bill pay service. Figure out where you can cut back on waste. Experts estimate that most households waste 10% to 15% of their income each month. Look through yours, and decide how many wasted dollars you can reclaim to put toward debt reduction. (23 seconds)
- Write your first debt reduction check: Take the amount you can spare from your budget and add it to the minimum payment of the first credit card you plan to tackle. So, if your minimum payment is $75, and you can spare $100 from your budget for debt reduction, your payment will be $175. (9 seconds)
- Last trick, create a Debt Snowball: Every month, make sure that extra amount is going toward the credit card account you are working on. Continue to pay the minimum on all of your other credit cards. When you pay off the first credit card on your list, take the entire amount that you were paying on that card and apply it to the next card on your list. So, if your next card has a minimum of $65, you would add the entire $175 you have been paying on the first credit card to the minimum for a new payment of $240. This is a time tested technique to accelerate your efforts.
While it will certainly take you more than 60 seconds to get rid of all of your debt, it doesn’t mean you can’t get started in less than a minute. A few seconds is all you need to kick start your debt payoff plan and be on the road to financial health again!
For more information contact us at 845.563.0537 or Contact@CompassAMG.com
The author of this blog, Steven M DiGregorio is President of Compass Asset Management Group, LLC and an Investment Advisor Representative with Spire Wealth Management, LLC a Federally Registered Investment Advisory Firm. Securities offered through an affilliated company Spire Securities, LLC a Registered Broker/Dealer and member FINRA/SIPC.
Tags: cash flow, credit, credit cards, debt, debt reduction, finances, payments
