Fast forward to 2004
As my relationship with my girlfriend was developing, and it was obvious that marriage was in our future, I had to share with her my terrible secret - I was bringing over $30,000 worth of debt into our relationship, and no plan of how to pay it off. I must be better looking than I thought because she stuck around, and has been extremely supportive and understanding. As of today, my credit card debt is only $3,475.38, and dropping at an amazing rate. As weird as it sounds, I actually enjoy making credit card payment now because I love seeing the balance whittle towards zero.
The approach I’ve taken to paying off my unsecured debt is as follows:
- Quit making charges to the credit cards
- Apply 90%+ off my disposable income to the highest interest rate card (while paying the minimums on the other cards)
- Once the highest interest rate card is paid off, do the same with the next highest interest rate card (repeat until all credit cards are paid off)
- Whenever possible, transfer debt to lower interest rate cards, or better yet, 0% interest rate cards
- Request cash gifts for holidays/birthdays and apply them to credit card debt
- Sell useless items on craigslist.org or ebay.com and apply proceeds to credit card debt
- Increase income (easier said than done, but I went from $40K per annum in 2004 to $66K+ per annum in 2007)
Some other suggestions I have heard, and why I choose not to use them:
- Cut up all credit cards - Not for 1MansMoney because we do not have an emergency fund yet.
- Pay off the small balances first (for a sense of achievement), then attack larger card balances - Not for 1MansMoney because I can do math and know that you want to pay the higher interest rate cards first, regardless of the balance size.
- Debt consolidation - Not for 1MansMoney because there are too many debt consolidation horror stories.
- Store credit cards in the freezer to eliminate impulse purchases (the cards supposedly can’t be swiped for a few hours after freezing) - Not for 1MansMoney because this gimmick wouldn’t stop me from purchasing online.
To get an idea of how vigilant I have been with my debt payments, check out the one year payment history for a credit card I just paid off (click on spreadsheet below):
* NOTE: As you can see in the balance column, some charges were made to the card from time-to-time. Hey, nobody is perfect.
Sacrifice, sacrifice, sacrifice. It’s worth it to get out of the strangle hold of debt and start building your net worth.