9/22/2023 0 Comments Which bills should i pay off first![]() Remember those short-term cuts you put in place when combing through your budget? Speeding up your debt paydown plan can mean returning to some of that spending sooner. But applying these windfalls to your credit card balances can speed up your repayment time. If you receive a tax refund, work bonus, overtime pay, or even extra money in your budget, it can be tempting to spend your good fortune. It might take longer to see a debt paid off, but it'll help you save money on interest over time. Pay the minimum payment on all your other debt, then pay as much as you can toward your debt with the highest interest rate. Keep in mind, this method may cost more in interest in the long run. Repeat the process with the next smallest card until you're debt free. Pay the minimum due on all your other debt, then pay as much as you can toward your smallest balance. This can help you stay motivated with quick wins as you may pay off your smaller cards. If you have more than one card, there are a couple of routes you can take. Apply all your extra monthly cash toward that credit card until it's paid off. If you've got one credit card, your path is simple. See note1 They may be able to help you understand more about credit and give guidance specific to your situation. If you need more help, you can contact an agency that specializes in helping people manage credit and pay down debt, like the National Foundation for Credit Counseling. Then let any interest savings you might squeeze out of this strategy speed up your paydown plan. Stick to your plan to pay the consolidated balance down. ![]() Plus, the emotional feeling of seeing a $0 balance on the old card can be a bit of a mental trap. Keep in mind, moving debt around doesn't actually lower what you owe and you may incur balance transfer fees. This helps you save some interest so you can pay down the balance quicker. You could also transfer your balances to a credit card with a lower interest rate. If you need help managing your credit cards, many companies have programs in place to help you if you're struggling with payments. You may also want to consider a second job, a new job for you or your partner or an entrepreneurial endeavor. If it's easier to pull in some extra income than giving up spending, look for items you no longer use and sell them online or at a garage sale. When faced with painful cuts, remember that this is just a temporary change until you pay your credit card balances down. Don't miss the opportunity to pay down debt instead of putting that extra money elsewhere.Ĭanceling premium cable, eating out less or clipping coupons are all changes that can help. If it feels daunting, increase your payments a little at a time when you're able to cut another expense or get some extra income. A big monthly payment will help blast through that debt much faster. A small payment is like a small chisel, chipping away slowly at your balances. Think of your monthly payment as a chisel. If you only make the minimum payments, you won't make much progress because of accrued interest. Having a cash cushion in a safe account that you can get to easily will keep you from charging unexpected expenses to your credit card. Instead, make sure you're making the minimum payment, then funnel extra cash into an emergency savings account.īefore aggressively paying down your cards, start small and work toward having $1,000 in a savings account. Should you save or pay off debt first? Oddly enough, the next step to paying down credit cards may not be making extra payments. You're less likely to use your plastic if it's not readily available. You should also remove them from sites where it's easy to make online purchases. Remove your cards from your wallet and store them in a safe place. But it can help to frame this step as "not right now," instead of "never again." Don't let new spending cancel your hard work paying down debt. Pausing your spending forever may not fit your long-term money management preferences. Take a break from using your credit card. ![]() If you find yourself saying, "Now it's time to pay that balance down," read more and get a 12-month plan to make your debt a memory. And in the meantime, the minimum payments you were making weren't keeping the balance down. So what happened? Those small purchases added up over time. But over time, the balance seemed to grow on its own. A few months and purchases later, there was a manageable balance. When your credit card was new and shiny, the balance read $0.
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