How to Pay off Debt when You’re in Over Your Head

My first credit card displayed my university’s logo, and fed my hunger for school spirit by informing me that it helped my school EVERY time I used it. Good selling tactic, huh? Though I loved my school, it wasn’t worth getting into debt over it. I learned the hard way. It is time for all of us to focus on the steps to take and reach financial freedom. So here are a few tips on how to do reduce and manage your debt effectively instead on wasting your energy worrying about it:

First: motivation

Instead of tucking your statements away, add the total debt and write it on a sticky note as a reminder that the phrase “out of sight and out of mind” only contributed to the problem, not the prize. It might be helpful to focus on the reward: a picture of your happy family, your dream home, perhaps even a well deserved vacation to paradise!

Second: choose a method:

  • Option 1: You can use the snowball method to pay off debt. Basically, this involves paying off the smallest accounts first, working your way up to the bigger accounts. This is especially good for people with lots of small accounts, like retail credit cards.
  • Option 2: If that’s not your style, use the ladder method. This form of debt repayment is the most efficient from a mathematical perspective. To use this method, pay off the highest interest account first, while making minimum payments to the others, and then step down the “ladder” to the next highest interest/balance until the debts are paid in full.

Pick a way that makes sense to you and stick with it.

Other helpful ways include:

  • Increase your income by getting a side job
  • Freeze your credit cards so you do not use them and accumulate more debt.
  • Discuss debt with family at least once a month to remind yourself to stay on track.
  • Reduce small purchases since they can add up in the short and long term.
  • Try to pay more than the minimum payment so more money is applied to your debt versus the credit card company.
  • Build a budget so you know where your money is going and how you can control spending by dividing wants versus needs. A budget will also help you brainstorm on ways to reduce your monthly variable expenses.

Don’t fall for the hook and line because you will ultimately sink further into debt until you take responsibility. The credit card companies may have hooked you with the offer, but you are responsible for the charges incurred, so start doing something about it! If you are in debt, contact us for a free budget review and learn about your options.

Clearpoint has been helping consumers with their personal finance goals and debt repayment strategies since 1964. Today, we work with consumers all over the country through counseling that is administered online, in person or over the phone. Learn about our services today!

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