Step Two to getting rid of Debt
Well after I took the first step and listed all of the credit card debt I had to move on. The next thing that I had to do was make a plan to reduce the debt. I decided to use the debt snowball method which I have written about here as well. I used the debt snowball calculator to estimate when I would be out of debt if I continued to pay the way I always do. Then I experimented with changing a few small things around and was amazed to see the difference that the snowball method makes.
The next thing I looked at when making my plan was to carefully budget my money so that I could account for where all my dollars were going. I used Money to track my spending and income and it was really depressing and a bit shocking to see that most months I was spending a lot more than I had coming in. I would not have realized how much I was actually spending until I took a look at the charts produced.
My general plan consisted of three main parts:
1. Do not add any more debt to the cards
2. Generate additional income
3. Pay off the cards according to the snowball.
I needed to work on all these three things at the same time in order to keep my plan on track. Sometimes I was able to do things that affected two or more areas at the same time and after a while it started to become the first thing on my mind every time I had to do something finance related. Here is a brief overview of each part of the three step plan:
Do not add any more debt to the cards
It was not very easy for me to refrain from adding new debt to the cards because some months I would not have enough income to take care of all that I needed. The main way I dealt with this problem was through the use of my rewards card. I would use the rewards card to pay for my purchases and then pay off the purchase on the card from my checking account. This brought the net transaction to zero but it earned me some rewards points that I would be able to use later on.
I taught myself a bit more restraint when it came to other things because I realized that I could not just go and add a pack of socks (I have an obsession with I love getting socks) to my credit card at any time I wanted.
Generate additional income
I am a POOR college student and I realized that I really had to do something to generate more income so that I could put that money towards my debt repayment. The meager income that I had from my little part time job was not enough to cover my monthly expenses and it would certainly not suffice to put extra payments on my credit cards.
I got involved in a number of online money making ventures like Cash Duck and Deal Barbie which are sites that pay you to take surveys and try out products. I made a few dollars from those sites but it was not anything that could qualify as steady income. (By the way if you click on the links and join up you can be my referral and I will earn a fee based on what you earn so we both win!!!!!)
I also started out with PayPerPost which allows you to write sponsored posts. You pick what you want to write about and fulfill the advertiser’s requirements and you get paid! What could be easier than that. By the way if you click on the button over to the left you can sign up for PPP and get started with writing your own sponsored posts. Alternatively you can click on the button at the very end of the post and review what I just wrote and you get an automatic $7.50 credited to you PPP account. Sweet!!!!!! I had Jagular sign up as my referral and he has already made more money than I did on PPP. I am sure he is going to love the surge in traffice from that plug.
Pay off the cards according to the snowball
According to my snowball I would be paying off the card with the smallest balance first. There is another method where you pay off the highest interest rate card first but since I had already resigned myself to paying the interest I decided to go for the psychological benefit of seeing one card march down to a zero balance.
When I put all of these things together I now had the basic plan for managing my debt and I could now work on taking it all away and getting a positive net worth again.
Please take the time to read Step One to Getting Rid of Debt
Related Posts
- Step Four to getting Rid of Debt
- The DOLP Snowball method to pay off Credit Cards
- Getting Out Of Debt Is About The Mind NOT The Money
- Suze Orman On the Oprah Show
- Step one to getting rid of debt
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