Money Diary Series
Ask an Expert – I’ve Racked Up My Credit Card… Now What?
Bola Sokunbi – Founder – clevergirlfinance.com
I’m three years out of college and making pretty good money. I do have some school loans but while living in a cool place in the city and hanging out with my friends I’ve racked up about $11,000 in credit card debt. I make a payment every month but it doesn’t make much of a dent.
I regret being in this position. How can I get this paid down?
It’s not uncommon to live it up when you first graduate from college and start making some “real” money. However, without a proper plan in place for your finances, it’s also pretty easy for things to get out of control. The good news is that with a few changes and with a focused strategy, it shouldn’t be that difficult to get things back under control, especially if you have a good income.
The first thing you need to do is to come up with a debt repayment plan. List how many credit cards you have, and decide to either attack your debt by paying off the smallest balance first or by paying off the highest interest debt first. Once you make this decision, your goal is to focus on and pay more toward that card each month and then pay the minimum balance on the other cards. Once the first card is paid off, you can rinse and repeat this process for the next debt you choose to pay off. If you only have one credit card then the process is easy – pay as much as you can over the minimum payment each month.
The good news is that with a few changes and with a focused strategy, it shouldn’t be that difficult to get things back under control, especially if you have a good income.
In order to do this successfully, it’s important to get on a budget so you know where your money is going. You’ll need to build your debt repayment into your budget and also ensure that you are keeping your expenses low and while still allowing yourself a budget to spend on having fun! A lot of people don’t like the word budget because they feel its restrictive or punishment but it’s really your guide to ensure you are spending less than you earn and you are giving a job to every dollar you earn.
I would also suggest putting about $1,000 aside in the event of an emergency or unplanned circumstance so you have the cash to leverage as opposed to having to rack up more debt. Once you’ve paid off your high-interest debt, you can repurpose the money you’ve freed up towards ramping up your student loan repayments by using the same approach and towards your other financial goals including saving for retirement.
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