We’ve all done it. You hit Macy’s or Kohl’s a little too hard and because of that, you’ve racked up quite the balance. According to Nerd Wallet, the average American household has now exceeded $15,000 in credit card debt. That is a staggering sum and one that many people feel bankruptcy is the only out.
I am not the type of financial consultant who will say everyone can dump $15,000 worth of credit card debt in the same amount of time because I would be lying to you. Everyone’s lifestyle, needs, and income are different and because of that, your financial plan will be different too. What I am going to do here is speak to you about how you can knock out $15,000 worth of credit card debt (and any number beyond that) efficiently and effectively.
Quick Disclaimer: This is hard work and probably 5% of the people who are reading this for advice on this situation are actually going to do it.
A lot of people are paying on their credit cards “as they can” instead of having a plan. Let’s use our friend Tina as an example. Tina has two paths she can take. She can have a plan, understand her Flex Cash, use a budget, and plan accordingly or she can pay “as she can”. It sounds much better to say, “I have $800 extra every month and I am going to dedicate that towards the balance.” And after 1.5 years, Tina is out of credit card debt. But wait! Tina wasn’t counting on her tax return to be as high as it was nor did she calculate her third paycheck which took place twice during this credit card payoff frenzy. Because of those two boosters, she was done in less than a year!
This could be you.
But have you calculated your Flex Cash? Have you built a lean budget? Have you cut your wants and kept the needs? If not, you’re going to be forever paying “as you can” instead of being aggressive and ripping through the debt.
Let’s take a person who has $500 left over every month and follows my teachings when it comes to the third paycheck, tax returns, and bonuses. This is Jim. Jim nets about $3,000 every month, meaning his third paycheck is $1,500 which occurs twice per year for a total of $3,000 (if you don’t know what I mean by third paycheck, read this article). Jim also receives about $1,500 in a tax return every year. He doesn’t receive a bonus, sorry Jim.
With this data, how quickly can Jim payoff $15,000 dollars? Let’s look at the chart and assume he is going to start in January of 2017:
Factoring in his tax returns and his use of the third paycheck, he will be done in 14 months. Jim makes less than the average household income for Americans, yet he has the potential on knocking out $15,000 worth of credit card debt in 14 months. Jim has also been following my plan, so he also has $1,800 in the bank for emergencies (Move #3) to help him worth through his credit card debt.
I didn’t mention balance transfers but that is an option as well, but it must be coupled with movement. You cannot push everything onto a 0% interest card for 18 months and let it hang there. That’s a dopey move. It should also be mentioned that your cards should be cut up (before you start) and the accounts should be closed (after they've been paid off).
Guys (and gals), this is not difficult on paper, but it is difficult in practice. Life happens, and I get that. But you can have a plan for life happening. The truth is, most people use it as an excuse to avoid working hard. I have seen it too much. Way too much. Everyone needs to have a plan and manage their money or else their money will manage them. You will wind in 60 with no savings, no assets, and be in a position of having to work extremely hard because you didn’t care about the details when you were young. Good news is, there is hope, even for people in their sixties.
I’d be glad to work with anyone who needs to help and per my company’s policy, if you are in or around the poverty line, our services are free. I don’t believe that people should have to pay money that they don’t have to get on a financial plan that works for them. So, if you’re ready to take the jump, my team is here.
Let’s go to work.