April is Financial Literacy Month and at Union Savings Bank, it’s a special time of year. We celebrate the opportunity to talk about ways to budget and save money that can bring your financial goals within reach. After all, setting financial goals is the first step toward buying a home, sending kids to college, or planning a dream retirement. This Financial Literacy Month, we’ll be diving into personal stories about budgeting, saving, home buying, and talking about money with loved ones to inspire you to start conversations about your own financial goals.
For millions of Americans, credit card debt is a very real part of life. In fact, there is over $1 trillion in credit card debt among Americans right at this moment. And at one time, I was a part of that statistic.
Navigating my finances after college was a challenge. The majority of every paycheck was going toward student loan repayment. Tackling this debt felt like a huge victory but because I placed my various financial obligations into silos, my creeping credit card debt took me by surprise. And once it started, it felt like it would never end.
Through careful planning and budgeting, I was able to pay down that debt before it took over my life. If you are looking for ways to budget and save money while paying down your credit card debt, there is good news. You can pay down your debt and manage your finances without sacrificing your goals and dreams for the future.
Paying down credit card debt was an eye-opening experience. Once I sat down to look at my finances in full, I realized that, in many ways, I was working against my own best interests. Seeing the full picture taught me three very valuable lessons.
Lesson 1: Ignoring problems doesn’t make them go away. There have been many instances when I wish this wasn’t true, but unfortunately letting problems sit and fester does not make them disappear. Tackling credit card debt takes commitment, but once you recover from the initial panic, facing the issue head-on is empowering.
Lesson 2: Everything is connected. Your 401k through your employer and your credit card debt may seem worlds apart. But what happens when you begin paying down your credit card debt and budget to avoid it in the future? You have more income to put into your retirement savings plan. That feels pretty great.
Lesson 3: Small victories matter. Of all the credit cards I racked up debt on, the card with the least amount of debt was the most satisfying. Why? Because I knocked it out in just a couple of months. It may not have made a huge dent in my overall debt, but it was the motivation I needed to keep going.
After learning these lessons about paying down credit card debt, my first course of action was to make a plan.
Just as ignoring your credit card debt is not a viable solution, tackling it without a plan is equally ill-fated. Planning and budgeting are your secret weapons for defeating credit card debt. You may also find that a plan will help you avoid impulses like throwing your monthly savings at your debt. This means that you can stick to your savings goals while also paying down your credit card debt.
The first step when making a credit card debt repayment plan is to decide which cards to start with. At first glance, your total amount owed may be pretty daunting. That’s why breaking up what you owe by credit card, specifically by interest rate, is a smart strategy. Tackling your highest interest cards first can help you shorten your repayment schedule. For me, knocking out that first small amount of debt was the inspiration I needed to continue on my repayment path, so even if this isn’t your highest interest card, that boost of confidence may be just what you need, too.
Once you prioritize your credit cards for debt repayment, it’s time to set a repayment goal. How long will you need to pay off your credit card debt? One year? Thirty-six months? Make your goal realistic, but don’t give yourself too much slack. One month off your plan and your entire schedule could come careening to a halt. Do your best to set a goal and stick to it.
With your goal written and posted in a visible place (motivation is the name of the game), you’re ready to begin scheduling your payments. An accurate payment schedule will tell you exactly when and how much your payments need to be from now until they are paid off in full. Not sure how to calculate your credit card debt repayment? Our calculator can help you map it out according to your payoff goal.
The last tip for paying down your credit card debt is to continue saving money. It’s easy to set aside your savings goals in favor of credit card debt repayment, but once your debt is gone, getting back into the swing of saving money can be difficult. Rather than resolving to start saving after your debt is paid, commit to save more. This is also a good deterrent for falling back into old habits like overspending on credit cards.
Credit card debt can feel insurmountable, but tackling it piece by piece and keeping your goals front and center can help you succeed. Making a plan and sticking to it can put you on the path to a brighter financial future. Need help getting back on track? Contact our FutureTrack team today.