Nobody enjoys being laden with consumer debt. However, it’s a financial hurdle many of us stumble upon at certain stages in our lives. Although it might feel like a burden to have monetary obligations looming over your head, the silver lining is that you can devise an efficient method to wriggle out of that debt.
I am genuinely fascinated by personal accounts of how individuals are handling and settling their debts. Everyone brings a unique perspective to this situation. Recently, a woman from my financial management Facebook group shared her process of repaying more than $9,000 of debt within a year. Her gameplan was quite inspiring, so with her consent, I decided to share it for the benefit of others in similar situations, calling her Sheila for this post. If you are struggling with consumer debt, her strategies can offer a great starting point for your debt repayment journey.
EXAMINE AND EVALUATE
The first step in any productive debt repayment venture is understanding your current situation. Sheila’s process began with organization and evaluation of her debt—its origins and payment details.
Sheila’s debt, totaling $9,000, together with her husband’s, originates mostly from credit card usage. A credit card balance of $2,000 got out of hand, and her husband owed a few hundred dollars on other cards. A significant chunk of their debt, over $3,000, was incurred when they replaced their A/C and furnace. They also borrowed approximately $2,200 to finance a new bed.
Sheila made a spreadsheet to categorize and prioritize her debts, alongside their minimum payments and associated interest rates.
TAKE ADVANTAGE OF BALANCE TRANSFER
One of Sheila’s commendable decisions was facilitating a balance transfer for her husband. They knew that the credit card used to purchase the new A/C and furnace would drive up their monthly interest payments.
A balance transfer helped the couple move this hefty balance to another credit card with 0% interest, incurring only a small fee. The new card offers 0% APR for the next year. This gives them an opportunity to manage other debts and save on interest while they pay this larger amount.
ADOPT THE SNOWBALL METHOD
Different debt repayment methods work for different people. Sheila and her husband adopted the snowball method: they started with the smallest balance, aiming for an early victory.
Then, they moved to the next debt, gradually taking bigger ones as they moved along. This strategy helped increase their cash flow, providing them with more resources to tackle larger debts.
INCREASE YOUR RESOURCES
Using Dave Ramsey’s metaphor of a shovel refers to your income and other resources that can help you climb out of your debt pit. The bigger the shovel, the easier it becomes to get out.
Sheila and her husband are trying to expand their shovel to repay their $9,000 consumer debt. Besides their regular income, Sheila plans to work extra hours and her husband is considering food delivery one day a week to cover his credit card payments, freeing up other funds for further debt repayment.
CUT DOWN ON EXTRAVAGANCE
Sheila’s family plans to keep their spending in check for the rest of the year to expedite their debt reduction. They intend to limit dining out and subscription services, and instead look for deals on necessary items like clothes for the kids. While foregoing a big family vacation is not appealing, they’re considering affordable local trips to save money.
STAY DEDICATED
Remaining committed on this journey of debt repayment is key. As Sheila and her husband are doing, hold regular financial meetings to discuss your debt repayment progress with your partner. If you stumble, recover and keep marching, recognizing your progress along the way to victory.
Are you grappling with consumer debt? Share your strategy with us.
