Our present financial condition is similar to my physical condition back in February. My wallet is horribly out of shape; my credit cards are stretched like me waist used to be; and cash flow is almost non-existent (much like my previously well concealed six pack). I think that is enough analogies for now, you get the point.

Where are we right now? Well, sad to say, we are burdened by about $15,000+ dollars in credit card debt. That debt costs us about $525/month just to stay on top on minimum payments. Crazy, isn’t it? It wasn’t always like this, when we got married we had three credit cards. It got this way because we (and most often me/I) got suckered into those credit card giveaways. We bought a new mattress and took advantage of the no interest, no payments for a year if you signed up for store credit card “special.” Of course we didn’t pay it off within the year, so we got charged the back interest. Same thing with a digital camera. We also had medical bills we couldn’t pay, so that ended up in a medical credit card. So right now we have about 9 credit cards. I could just smack myself for getting into this mess.

To make matters worse all those cards are maxed out. Why? Well, since my wife is a school teacher and I am a grad student we had two months each year with NO paycheck. We didn’t save/budget well so we ended up living off our credit cards.

So what now? I can’t go back and change this, but I can create an action plan to pay-off this debt. Chances are you could use an action plan too.

Here is the best tool available to get those credit cards in order and figure out how long it will take you to pay them off.

The steps are quite easy…

1. Make a list of all your credit cards and other debts. Include the outstanding balance, minimum payment, and interest rate.

2. Plug them into the above link and see how long it will take to pay them off making the minimum payment on each card.

3. Determine how much money you can add on top of your minimum monthly payments. Apply that amount to one card- choose either the card with the highest interest rate or the card with the lowest balance.

4. Look at your budget and see where you can cut back. Apply the money you save from that budget cut and add it onto the money you used in step 3 to pay either the highest interest rate card or the lowest balance.

5. When you finish paying off one of your cards apply that payment to another card.

Example: You have two credit cards, Mastercard and Discover. Mastercard has a balance of $2,300 with an interest rate of 16% and a minimum payment of $65, while Discover has a balance of $2,500 with an interest rate of 15.25% and a minimum payment of $70.

When you finish paying off your Mastercard, don’t let that $65 fall back into a budget hole, apply it to your Discover Card payment. The more cards you pay off the more powerful this system becomes.

How does this apply to my life and yours?  With us becoming two income family we now have about  $400-$500 to pay toward just credit card debt.  In addition, thanks to shaving out grocery budget we found another $200-$300 of funds.

What does this mean?  My debts will be paid off 57 MONTHS SOONER, and I save myself $6,564 in interest payments.  It means I can be debt free in 18 months from today- instead of six years from now if I made minimum payments.

  1. […] My wallet is horribly out of shape; my credit cards are stretched like me waist used to be; and cash flow is almost non-existent (much like my previously well concealed six pack). I think that is enough analogies for now, …Read full story… […]

  2. Neil says:

    Excellent advice, TT. Thanks for your candor.

    As a CPA I would gravitate to paying off the highest interest rate card first, but I heard some excellent advice from Dave Ramsey.

    He said to pay off the lowest balance first, then proceed to paying off the next lowest balance. You get a sense of accomplishment and momentum. He called it the “snowball” method.

    I highly recommend Dave Ramsey or Crown Financial Ministries. We’ve gotten excellent advice from both.

  3. Angel says:

    hi again..yes that was me in the pic on my post..ha 🙂

  4. mags says:

    Hi John, excellent advice. I too found myself in trouble but I opted for one of those debt consolidation plans. It’s worked wonders, actually, but they don’t take all of the bills…hoping I can get a credit card soon to get everything all together.

    Thanks for stopping by my place eariler!!!

  5. Scotti says:

    Great post and congrats on your credit card payment plan. I am a big Dave Ramsey fan. We took his “Financial Peace University” class through our church and are now proud to be debt free (except for our mortgage). It was painful at first living under a strict budget, but we are now happy to be ‘telling our money where to go’. Dave Ramsey has a website and a radio show as well. It is obvious from your weight loss success and achievement of personal goals that you will quickly find financial success as well. Best wishes to you and yours on this endeavor.

    God Bless!

  6. DulceDiana says:

    Wow…actually practical advice! Cool!

  7. jarvis says:

    Cool beans…keep at it!!! Your discipline with physical health should be of benefit on this journey as well.

    Blessings In Christ Bro

  8. Randy says:

    Several people already mentioned Dave Ramsey. He starts with the smallest debt first and then builds like a snowball as mentioned. Similar to dieting, it rewards good behavior quickly.

    Years ago, I followed a Ron Blue course, very similar to Dave Ramsey. I got on a spending plan which helped with family “discussions”.

    Fast forward several years, I’m trying to get my wife on a spending plan. We need to save up some money for a lot reasons in the next year. Our income is embarassingly sufficient, but never enough. If I can only convince my wife….

  9. “If I can only convince my wife….”

    Convincing your spouse to adopt the same attitude on anything (finances, sex, etc.) is often a hard thing to do. I have been quite blessed that my wife and I are on the same boat MOST of the time.

  10. Neil says:

    Ah, the spouse thing! I have found that making it “our” budget helps. Get him/her involved so it isn’t just one person being the bad guy.

    Sometimes they are more ready than you think. Years ago I was getting more serious about my faith and was convicted that we needed to be more generous. I wasn’t sure what my wife would think, but she was actually very supportive. In fact, she was probably thinking, “It’s about time!”

  11. Admiring the time and effort you put into your site and detailed information you offer. It’s nice to come across a blog every once in a while that isn’t the same outdated rehashed material. Great read! I’ve saved your site and I’m adding your RSS feeds to my Google account.

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