January Money Diet Day #6 – Let’s Get Serious About Crushing Debt

Pay off debt | January Money Diet

If you’re carrying debt, you’re not alone. According to an article in U.S. News and World Report, the average U.S. household has more than $15,000 in credit card debt. How can we ever accomplish the great things we want to do with our money, when we’re stuck paying for stuff we bought years ago — plus interest?

I’m living proof that there is a way out of the mess.

My Name is Eliza, and I Was a Charge-a-Holic

Six years ago, I had $12,000 of debt spread among four credit cards. Each month I’d pay more than the minimum balances, so I felt somewhat virtuous that I was working on the problem.

Yet each month, I seemed to find a reason to charge a few new things. After all, I was earning airline miles with every purchase on one card, and a whole 1% rebate on another! I also had an excellent credit score, which many financial planners said was very important. Of course, these justifications only fueled my self-deception. Meanwhile, the total amount I owed continued to creep up each month.

I finally could no longer stand the constant, sickening, dark cloud of debt. I decided to try Dave Ramsey’s Debt Snowball Plan. Following Dave’s advice, I focused on aggressively paying down the card with the lowest balance first, while making minimum payments on the other three cards.

Four credit cardsOnce the first was paid off, I moved to aggressively paying off the card with the second-highest balance — which went faster (like a snowball!) since I had one less bill to pay. You get the idea.

It took me three years to pay off the balances. Today I have one credit card, which I rarely use. I carry a debit card instead, which doesn’t allow me to spend money I don’t have. I balance my checkbook every week, and I budget like a fiend.

Can You See a Peaceful Financial Future?

Are you struggling with debt? What if this time next year, your credit card balance was zero? People do it every year, and you can, too.

What if, instead of paying money in interest, you were applying that money each month to a vacation fund? Or saving for something else important to you?

Perhaps you’d like to make a plan for paying off your balances. Here’s Dave Ramsey’s simple worksheet that you can use to write out your own personalized plan.

Could you take your credit cards out of your wallet and put them in a safe place for now? Physically removing the temptation is a big help to me, and it might work for you, too.

Let’s Do This!

Today’s challenge is to make a plan to get your balances paid off, and commit not to take on even one single dollar of new debt in 2016. If you’re so inclined, will you share a few words in the Comments section of this page about your plan to pay off debt?

If you’re already debt-free, perhaps you will you tell us how you achieved that victory and how it has affected your life. We all love hearing your stories.

No matter what your circumstances are, I promise you that people in worse financial shape have gotten out from the burden of debt and you can, too. So let’s agree to attack debt head-on this year.

Here’s to real, lasting financial freedom in the days ahead. Together, we can do this!

Hugs,

The signature for Eliza Cross

P.S. You’ll hear from me again on Friday, when we’ll tackle a new challenge. In the mean time, when you complete yesterday’s Challenge #2 be sure to leave a comment on the page and you’ll be entered to win a copy of the terrific money book “How to Get Rich Without Winning the Lottery” by Barbara Friedberg.

Top photo: Frankie Leon

About Eliza Cross

Eliza Cross is a full-time writer and the author of a dozen books about food and home design. She has been blogging about simplicity and sustainable living since 2006.

25 comments to January Money Diet Day #6 – Let’s Get Serious About Crushing Debt

  • Mila

    Christmas always gets me! I buy big presents for 10 people total. But I save throughout the year for this expenditure and charge the rest. This year it will take me three months to pay it off. I need to save more monthly!

  • Laura

    My husband and I were swimming in credit card debt due to irresponsible spending and living outside of our means. An opportunity arose to move to a state with a much lower cost of living. While we were leery of leaving our friends and family, we decided to move. It was the best financial and personal decision we ever made! We are now debt free and saving. And our relationship is much better now that we don’t have the stress of debt in our lives.

    We still use a credit card for all purchases to rack up the rewards points, but we make sure to pay it completely off every month. We won’t let ourselves get in the RED again!

    I don’t think moving is necessarily the right choice for everyone, but I think it is wise to weigh all your options. Who knows, it might be fun!

  • Lisa

    We have one card with low, $500 limit, that is the only card we use to purchase items online. We got it years ago when we were leery of internet fraud, and have kept it because it limits how much we can buy online. It’s paid off each month,and usually doesn’t reach the maximum amount. Our regular credit card with an insane limit of $13,000 is used just for large purchases like airline tickets. We tried to get them to reduce the limit but it was too much of a hassle. Don’t you think banks should let you pick your limit?

  • Annette

    4 years ago I had about $30,000 in consumer debt but through determination and hard work I paid it off April 2015. I have been debt free (except my mortgage) ever since! I can’t express enough the amazing feeling of being debt free -it feels better than any impulse purchase ever did and the money I make is my own. My savings account has grown and I always have money in my checking account. I no longer feel trapped by my debt and it really gives you a freedom to make different choices for your life that you just can’t make when you carry a high amount of consumer debt.

    • I love your story, Annette! You showed such determination when you paid off $30,000 of debt in four years, and it’s so inspiring to hear how happy and free you feel now that you’re no longer under the shadow of debt. Thank you, thank you. I know others will be inspired by your story! xoxo

  • Kim

    I only use credit card for online shopping & vacations and save the money before hand for purchases so I can always pay the total amount of bill.

  • Stephanie

    We started this a year ago. 2 cards down and we are continuing to keep working on this throughout 2016. It may take us a while but we will get there with determination.

  • Lynn Louise

    I have one major credit card that pays me cash back. I charge everything on it. I figure I have to pay the charge anyway so why not get money, even if it is only 1% back. It’s free money! I have over $500 in my cash back account right now. I may use it to my bill, or I may use it at Christmas, or I may put it towards our mortgage as an extra payment. I pay off the balance in FULL every single month and have never carried a balance or paid interest or had a late fee. This way the cash back is truly free money. I have store credit cards also like Kohls and Gap but if I use them I only do so if I am using a coupon that is only activated by use of that specific card. If not, then I use my major credit card and get the cash back. The store credit cards are always paid in full also with each statement. I would never pay those high interest rates or late fees. I really stay on top of the credit cards.

  • This is an easy one for us, we have $0 debt and haven’t used credit cards in many years. We living within our means and don’t plan to stop doing so anytime soon! 😉 I am VERY strict that I do not like to “owe” anyone, anything. So we save up to purchase larger ticket items and if it’s not in the budget, we go without. 🙂

  • Lynette

    Yes, that is totally my goal for 2016 not one single dollar on credit. I have 2 personal credit cards maxed out and also a daily living credit card attached to our offset account, my goal this year is to pay them all off so next year my only debt will be my mortgage, I can do it!

  • My husband and I are lucky that apart from the ocassional month (where we didn’t get paid – usually after a holiday) we’ve always paid our credit card balances in full each month and even on those few months we couldn’t it was paid off as soon as possible.

    The only debts we have are my student loan (in Australia these are with the government and don’t get interest only annual cost of living inflation with CPI and gets automatically paid off as part of your taxes when you earn over a certain amount, or you can pay it off quicker) and our mortgage. Our current financial goal is to pay the mortgage off as quickly as possible while still having money to buy things we need/want.

    • That’s a great goal, Megan. It’s interesting to hear how student loan payments work in Australia, and I wish the U.S. shared your country’s attitude about how much interest to charge students. Thanks for sharing your wonderful perspective! xo

  • Sharyn

    I cut my credit card up recently so now I cannot use it. I had limited It to $1,000. I see things at the shop I want and then I think if I don’t have real money in my account I will just have to do without it

  • When I was first out of college I racked up a few thousand dollars on my credit cards… or more accurately, my live-in boyfriend did. He couldn’t qualify for a credit card (I should have seen the writing on the wall there, but I was young and stupid) so he convinced me that we should charge everything to my cards and then he’d pay me back his share later. Of course “later” never came.

    When we broke up I told my dad about the debt and he totally freaked. He handed me a check with instructions to pay off the balances in full, and to NEVER let it happen again. So I immediately set up all of my credit cards on automatic payment plans where the full balance would be deducted from my checking account each month, and that keeps me honest.

    I then had to pay off the debt to my father, and… well… somehow it feels totally different when you owe money to an actual person and not a nebulous concept like a credit card company. I had it totally paid off in less than a year and have never carried a credit card balance since.

    I still use credit cards for just about everything, but I make it into a bit of a game to see how low I can get those monthly bills to be. I actually find it quite helpful to go over the statements each month so I can see where the money is really going (hello vet bills!)

    And reward points… ALWAYS use them as cash against your balance. That way they’re actually giving you a real benefit rather than an excuse to spend more money.

    • Your story made me smile, Cat Lady. I bet many of us have shared finances with someone like your wayward boyfriend! 🙂 I love that your dad was in a position to help you, and I love that you developed such good money management skills as a result of that experience. Gotta love silver linings!

      I am in awe of people like you and Amy, above, who can use credit cards for monthly expenses and pay off the balance each month. I aspire to be able to do this someday, but for now I seem to do best with a debit card. Thanks for sharing your story and great outcome. xo

  • Amy

    I know this method may not work for some people, but I have had a credit card since I was in college and have never paid a single dollar in interest. I was drawn in by the rewards (the Venture card offers 2 miles per dollar spent!) but was always warned of the dangers of credit card debt. SO, I decided to treat my credit card like it was my debit card. I never spend more than I can pay down within a month. It’s actually a really nice way to take advantage of the rewards and manage my budget (since I have one large payment per month rather than a bunch of small ones). Just a thought for those who can resist the temptation of the credit limit 🙂

    • It sounds like you’ve learned how to maximize the benefits of your credit card without incurring any of the risks. Good for you, Amy! Thank you for sharing your secret to treat the card like a debit card, which helps you keep spending in check. Bravo!

  • Sara

    Im planning to use what I save this month to pay off My student loan.

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