6 Steps to Crushing Debt
Getting rid of high debt takes hard work and willpower, but it’s doable. Here are six steps to help you start crushing debt today.
Step 1: Choose your debt-crushing method
There are two approaches toward getting rid of debt:
The snowball method involves paying off your debt with the smallest balance first and then moving to the next-smallest, until all debts have been paid off.
The avalanche method involves getting rid of the debt with the highest interest rate first and then moving on to the debt with the second-highest rate until all debts are paid off.
Each method has its advantages, with the snowball method placing a heavier emphasis on achieving results at a faster pace, and the avalanche method focusing more on actual savings to the borrower's money in overall interest paid. Choose whichever method appeals to you more.
Step 2: Maximize your payments
Credit card companies make it easy—and seemingly affordable—to stick to the minimum payment each month. But doing so can cost you significantly more over time and drag out your repayment timeline. To tackle your debt faster, aim to pay more than the minimum whenever possible. Look for ways to free up extra cash, like cutting back in one budget category or picking up a freelance gig, and put those funds directly toward your credit card balance. Every extra dollar helps you pay off debt sooner and save on interest.
Step 3: Consider a debt consolidation loan
A personal loan from Cy-Fair FCU can provide you with the funds you need to pay off your credit card bills and leave you with a single, low-interest payment to make each month. Alternatively, consider transferring your balances to a single card with a low or 0% introductory APR, like our Day and Night Platinum Cards. Just keep in mind that once the introductory period ends, the rate will adjust to the card’s standard interest rate.
Step 4: Build an emergency fund
As you work toward pulling yourself out of debt, it’s important to take preventive measures to ensure it won’t happen again. You can do this by building an emergency fund. Start small, squirreling away whatever you can in a special savings account and adding the occasional windfall to beef up your fund.
Step 5: Reframe your money mindset
What got you into this mess? Are you consistently spending above your means? Is there a way you can boost your salary or significantly cut down on expenses? Lifestyle changes won’t be easy, but living debt-free makes it all worthwhile.
Step 6: Put away the plastic
Credit cards are an important component of financial health, but when you’re working to free yourself from debt, it’s best to keep your cards out of sight and out of mind. Learning to pay your way with cash and debit cards will also force you to be a more mindful spender.
Best of luck on your journey toward financial freedom!