How To Pay Off Credit Card Debt Step-By-Step (start saving money fast)

“I think a lot of us do feel ashamed. We don’t have enough to make ends meet.” That’s what a middle-aged woman from Baltimore who works the night shift said when she participated in a focus group about debt [source].

For many, debt causes of a lot of stress, sleepless nights, and friction in relationships. It doesn’t have to be this way.

When managed properly, debt can be a tool to help you live life fully.  It can teach you to make the most of your income, live within your means, and achieve big goals. Debt is a huge opportunity to discover abundance on your current income.

So let’s get started. Let’s get you on tack to pay off credit card debt and become debt free.

1. Start with a Budget

Getting out of debt is a matter of keeping income over expenses. It’s a powerful habit! When a small portion of every paycheck can go towards paying down your debt, you will become debt free.

Start with a budget. Bare bones, create one budget that tracks your discretionary spending (coffee, eating out, online shopping). Keep decreasing this budget until you are able to keep income over expenses every month.

That being said, the more aware you are of your money, the better it can be managed. Taking a little more time to compare your income to your expenses and make adjustments where needed is the key to efficient spending.

Copy these genius habits of women who never overspend!

2. Build Your Savings First

Now that you’ve got your budget set up and you’re keeping income over expenses every month, you may be tempted to start throwing that extra cash towards your debt.

We recommend you proceed with caution. You never know when a surprise emergency expense will occur. If it catches you unprepared (i.e. you have no savings), you’re just going to have to take on debt again.

Build your savings first. Gather about $1k in the bank before you start putting your extra money towards paying down your debt.

Related: Are these the bad habits that are causing your financial struggles?!

3. Use the Debt Snowball

What is the fastest way to pay down your debt? We’ve done the research. Turns out there is no fastest way. You can pay down the cheapest debt first, or pay down the debt with the highest interest rate first, or put a little extra money towards all debts at the same time. It does not matter.

However, there is one debt-payment strategy that stands apart as the most psychologically gratifying (and this definitely counts when it comes to the tough psychological game of living on nothing to pay down debt)

Use the debt snowball strategy. It’s simple. Keep income over expenses, and put that extra money towards your smallest debt. Pay the minimum payments on all your other debt. This will get that first debt paid down as fast as possible.

When you’ve paid off your first debt, you have one less minimum monthly payment. Take that extra money and put it towards your next smallest debt.

With each debt you pay down, you have more money to put towards your next debt. Your money snowballs which means your debt doesn’t stand a chance.

Should You Pay Off Credit Card Debt Early?

If you are wondering whether it is worth it to pay off credit card debt early, then the answer is a resounding YES!!! The obvious reason involves saving a ton of money by not paying more interest than necessary. But there is much more at stake, and it might not be as obvious. 

Dr. Galen Buckwalter, a research psychologist, asserts financial trauma, a dysfunctional reaction to chronic financial stress, can be likened to the symptoms associated with post-traumatic stress disorder [source]. Debt plays a role in financial trauma. So, debt can negatively impact your physical and emotional health.

But, there is good news. A 2019 university research study, considered to be the first of its kind, concludes reducing debt improves a person’s mental health, and I would add physical health, too. If you get rid of debt, you will feel better and make better decisions [source]. 

If you have suffered the negative consequences of credit card debt, and you want a better future, take action. Becoming debt free starts today.

These are the tips you need to live on next to nothing!

Use these tips to DRASTICALLY lower your household bills and expenses!

Related: Exactly What to STOP BUYING to Save Money

If you’re trying to save money on a low income use these genius tips!