Are you overwhelmed with credit card debt?
I know the feeling. That's why I created the Debt Payoff Tracker worksheet.
Nothing will keep you from saving money like credit card debt. Paying it off should be your #1 money goal.
Think of all the extra cash you'll have when you don't have to make those payments every month. You can start paying that to yourself by depositing it into a savings or investment account instead of paying it to the credit card company.
For more information on the cost of credit card debt, read this case study on the cost of revolving credit card debt.
How to Squash Debt
There are three simple steps to paying off your credit card debt.
- Stop buying things with credit cards. If you don't have enough cash to pay for the things you want, don't buy them. Using credit cards for rewards only works out if you pay the balances off every month.
- Use the Debt Payoff Tracker to get started paying off your balances.
- Spend every extra penny paying down one account at a time.
Stop Buying Things With Credit Cards
Seriously though, stop buying stuff with credit cards.
It sounds simple, but not always easy to do when you have a spending habit. Trust me, I know. I have a hard time telling myself no sometimes.
Here's the secret to kicking the spending habit: you need something that gives you the same feeling that retail therapy gives you. A bigger goal or reason to abstain is the best motivator. For me, the dream of taking a mini retirement and sailing the world helps me stay focused.
For inspiration on finding your “why”, read about 31 things that happen when you decide to pursue your dream. This is one of my favorite articles!
Here are a few more ways to stop spending:
- When you're tempted to make a credit card purchase, make yourself wait two weeks. If you still want the thing in two weeks, try to save up and pay for it with money in your bank account.
- Before your next pay day, make a plan for exactly how you'll spend the money. Try to eliminate nonessential (discretionary) spending and use the extra dollars to pay down one of your credit cards.
- Give every dollar a job. This is also known as “zero balance budgeting”. Your income minus spending minus savings should equal zero.
- Track your spending with a Household Ledger – download a free worksheet here. No more surprises on where all of your money went. No more excuses.
UsE the Debt Payoff Tracker
Use the Debt Payoff Tracker worksheet to list out all of your accounts and balances, and then track your purchases, interest charges, and payments for 12 months.
The Debt Payoff Tracker printable worksheet contains 2 pages, tracking 12 months of balances on 5 card accounts.
Download it here for free:
If you're making debt payments and your balances aren't dropping, this worksheet will show you why.
Steps to Using the Debt Payoff Tracker Worksheet
- Step 1 – Decide which credit card to pay off first, and list it in the first column. Then list up to 4 additional cards on the tracker worksheet.
- Step 2 – Record your Beginning Balances under your card account names. List the balance from your last month's statement.
- Step 3 – When this month is over, record your total purchases, your interest charge (you can find it on your card statement), and your payment.
- Step 4 – Calculate your new balance by taking your starting balance, plus purchases, plus interest, minus payments.
Breaking Out Interest
I've seen several debt tracker worksheets online that don't provide a place to record interest. Those worksheets show beginning balance plus purchases minus payments equals ending balance.
If you don't include interest, your ending balance won't be correct. Interest is not a purchase. Its what you pay the credit card company for the choice to pay for things with a credit card instead of cash.
By breaking out interest, you are recognizing and knowing how much of your hard earned dollars are being spent on payments to the credit card company you can never recover.
You need to know what that number is every month. Every year.
It will motivate you to pay off your balances.
Spend Every Penny Paying Down One Card
Choose one card to target at a time. Squash the balance by paying it down with every penny you can scrape up. Comb through your expenses and find ways to spend less. Have a garage sale or sell things on Ebay for some extra cash.
There are two schools of thought on which debt to pay off first, the Snowball Method and the Avalanche Method.
- Snowball Method – Pay off your lowest balance first, and then move on to the next lowest balance.
- Avalanche Method – Pay off your highest interest rate card first, and then move on to the card with the next highest interest rate.
Both methods result in the same ending – your debts paid off. So choose whichever one sounds best to you.
Make sure you pay the required minimum balances on all other cards.
Once you pay off a card balance, stop using the card. Then pick the next card to start paying down.
That's how you eliminate debt.
Watching your balances go down using the Debt Payment Tracker will motivate you to keep going until they are all paid off!
When your credit card debts are paid off, you will have more money every month to save and invest.