How One Woman is Paying Down $9,000+ of Debt is a post originally published on: Everything Finance - Everything Finance - Its all about Money!

No one likes having consumer debt or being in debt at all for that matter. Yet, many of us find ourselves in debt at one point or another in our lives. Yes, it’s hard to live with payments hanging over your head, but the good news is that you can develop a plan to work your way out of debt.

I personally love hearing first-hand accounts of how people are managing and paying off their debt. Everyone’s story is different, and a woman in my money-management Facebook group recently shared how she was going to pay down more than $9,000 of debt this year. Her strategy is pretty awesome and inspiring so I asked her permission to share it and layout all the steps. To protect her identity, I’ll call her Sheila for the sake of this post. If you have consumer debt and are looking for a place to start when it comes to your debt repayment strategy, these tips can help tremendously.

Assess the Situation

The first step to any successful debt repayment plan involves assessing the situation. In Sheila’s case, it meant getting organized and laying out debt she has, where it came from, and the existing payment details.

The $9,000 of debt Sheila and her husband have is mostly from credit cards. She has a $2,000 card balance that has gotten a little out of control and her husband has a few hundred dollars on some cards. Another major debt they have is a more than $3,000 bill for getting their A/C and furnace replaced recently. Then, there’s about $2,200 that was borrowed to finance a new bed for the couple.

Sheila made a spreadsheet where she was able to rank each debt based on her priorities and include any minimum payments and relevant interest rates.

Balance Transfer

One thing Sheila did right off the bat was very savvy was encourage her husband to get a balance transfer. Since the purchase for the new A/C and furnace was made with one of his credit cards, they both knew their monthly interest payments for that card would skyrocket.

With a balance transfer, the couple only had to pay a small fee to move the high balance to another credit card with 0% interest. The new balance transfer card will have 0% APR for the next 12 months. This allows them some time to get other debts under control and save some money on interest as they work on this larger balance.

RELATED: Should You Get a Balance Transfer to Pay Off Credit Card Debt?

Start Implementing the Snowball Method

There are many different ways to pay off debt. The key is to decide which method works best for you and be able to stick with it. Sheila and her husband decided to start using the snowball method to tackle their debt. This involves starting with the smallest balance and paying it off first for a quick win.

Then, you roll that payment onto the next debt and just keep working your way up the ladder. As you pay off more debt, even if it’s smaller balances, your cash flow will increase and you’ll have more money to put toward the higher balances when you get to them.

RELATED: 3 Methods of Debt Payoff You Need to Know

Increase the Size of the Shovel

I’m not the biggest Dave Ramsey fan, but I do love when his shovel analogy when he’s talking to people about paying off their debt. He views living in debt as being stuck in a deep ditch. The more debt you have, the bigger the ditch is. However, you do have a shovel and that’s usually your income along with other resources that can help you get out of debt.

If your ‘shovel’ is small, it’s going to be harder to get out of the ‘ditch’ or your debt because you won’t have much to combat things like interest charges or just extra unexpected expenses which could delay your progress. When your shovel is bigger, it’s easier to free yourself of debt.

Sheila and her husband are definitely focusing on increasing the size of their shovel to pay off $9,000 of consumer debt. For starters, they will have extra income of anywhere from $700 to $900 per month coming in. Sheila also plans on picking up some extra hours at work to increase her income. Her husband will be doing food delivery once a week to earn the money for his monthly minimum credit card payments. That way, all other extra money can go toward additional debt repayment.

Limit Extra Spending

Sheila explained how her family would definitely be watching their spending for the remainder of the year in order to pay down as much consumer debt as quickly as possible.

“We likely won’t be dining out or doing a lot of activities that cost money,” she said in her post. “I plan to really look for deals whenever we need to buy something like a household item or some clothes for the kids. As much as I don’t want to forego a family vacation this year or next year, I will be focused on planning an affordable mini-trip or nearby getaway instead to save more money.”

Sheila and her husband already have a realistic budget in place which is great. They plan to compare pricing on insurance, manage their grocery spending better, and cut out any unnecessary bills for the time being.

Stay the Course

Staying the course is so important when you’re on a debt repayment journey. Some days will be harder than others. So you’ll need to find support from a partner, loved one, or friend who can encourage you on the way.

If you’re paying off debt with a partner like Sheila has been, be sure to set up regular money meetings to discuss household finances and your debt repayment progress. Don’t beat yourself up if you have a slip-up or don’t meet one of your goals for the month. Just get back on track and acknowledge your progress along the way to make the journey more successful.

Are you trying to pay off consumer debt right now? What does your strategy look like?

How One Woman is Paying Down $9,000+ of Debt is a post originally published on: Everything Finance - Everything Finance - Its all about Money!