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Credit Card Debt

My husband and I were talking about our Budget: The Early Years. I was trying to think of how to talk about debt and he said “The biggest thing folks need to remember about debt is that no matter how much it is, YOU CAN FIX IT!  Its not like cancer, or sick kids or name your natural serious issue, debt is the one biggie that we all have control over and it’s a matter of spending less than you make.” And that is exactly what I was looking for. He just worded it better than I could. 🙂

The first step to overcoming debt is to be realistic about it. You can’t “think” you know how much you owe. Or approximate the total of your credit cards. Or try to pay off a credit card while you are still using it freely. If you have a list, an honest one, it might hurt, but you’ll be able to come up with a plan to pay it off.

I’m speaking from experience here. At one point, my husband and I had student loans, a car payment, a motorcycle payment, and a sizable credit card balance. When we realized we needed a budget about 6 months into our marriage, we made a list of our expenses and how much we paid on the one credit card we used. We didn’t understand. We were paying $1,000 per month on our $10,000 credit card debt. Why wasn’t it going down??? Oh, right. We were putting another $1,500 on it every month.

That was a huge eye opener. And a great reason to stop using your credit card if you are trying to pay it off. We claimed we used it for bills (this was somewhat true, we did have a few bills that automatically went on the card), but the bulk of the use was for things we didn’t need. And stuff we’ve probably already gotten rid of since that was 4 years ago.

Free Downloadable Debt Payoff Calculator from Fresh Mommy Blog

So, lets get this debt on paper. And figure out the fastest way to get rid of it. Because that money you are paying on your debt has better places to be. Like a savings account. Or an IRA. Or a vacation fund. Or a fancy dinner out. The point is, once you aren’t paying on debt, you have a choice.  For example, if you’re paying $150/month on credit card debt and after paying it off, you put that money in a mutual fund averaging an 8% rate of return, in ten years you would have $26,075.81. Not too shabby. Post debt, you can pick where that money goes. And it’s so much more fun that way.

This Excel-based FMB Debt Calculator will let you list out your debt, which is the not-so-fun part. But it also lets you change what your payment is and then shows you roughly how many months it will take you to pay it off. Get it on paper and update every month. If you don’t have Excel, you can download the FMB Debt Form  to write in your debt and calculate manually. My husband and I looked at our balances together every month. The decreasing balances empowered us to keep on the right track and focus on the bigger picture. You can do it, too!

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