Debt can be a heavy burden. Sometimes it can seem like your payments are only there to be eaten up by the interest, putting you back at square one.
But can you do something about it? Yes! Can you pay off your credit card bills within a year? Well this depends how much you owe, but the average persons can, under the right circumstances. Paying off your credit card quick is one of, if not the best way to reduce your debt, and the interest you are paying.
Here we give you our guide to paying off your credit card debts within a year.
If you debts are large, then they can atleast be significatly reduced.
AllTheHighstreet.com's one year payment guide
1. Calculate your debt and interest
To start off with, you need to know how much you owe, including the interest you will be charged. We will call this your years debt.
Dont worry if you are not a maths wizz, just look at your credit card statements over the last few months, what interest are you paying per month? (in £ not %) Multiply this monthly interest by 12 and add it on to your current credit card ballance. It wont be exact, but you will have a rough idea.
Example: Credit Card Ballance: £2000. Monthly Interest: £50
So your interest is £50*12 = £600. Add this to your ballance of £2000. This brings you to £2600.
If your debt and interest rate stays the same, this is your years debt on your card.
2. Calculate your monthly payments
Now here comes the easy bit! Divide the years debt by 12, and this is what you need to aim to pay off each month.
In our example, this would be £2600 divided by 12. Which gives you £216.
Ouch. Yes, indeed ouch. But if you can do this within a year, the long term savings will be staggering! Even saving you £1000's.
What ever figure you got, you may think is impossible to pay off that amount each month. If you are thinking this, keep reading to find out how this can be done! There is some good news.
3. You can afford more than you think
Remember, this is a year long plan. And the pay-offs are worth the effort.
Now you know how much you need to pay each month, there is some good news (as promised!). Its not as bad as you think. Looking back at our example (and work this out based on your own debt too), we need to pay £216 a month. But we were already paying £50 a month in interest. So we only need to fork out an extra £166. Also, as your credit card ballance reduces each month, so will the interest you pay.
Now to look at where to get that extra money from.
4. Make a plan & Cut back
Now you know how much extra you need per month (in our example £166 extra, to pay off £216 per month), you need to get a piece of paper, and work out where you can save.
When writing this list/plan: Remember, this is only for one year. If you can do without certain luxuries for 12 months, this will give you extra, a lot extra in the future. It really is worth it.
a) First write down all your set bills than can be changed. These would include: mobile bill, satalite TV, landline, internet, gym membership, other memberships (eg LoveFilm, Xbox Live, Virgin Wine, magazine subscriptions etc), and anthing else.
b) Total up all these costs. (for our example, total costs: £140)
c) Now next to each item, write down your target cost for each item. If your mobile contract is due to be renewed, can you go on PAYG, or keep the same phone and a cheaper contract? Can you switch from Sky TV to Freeview for a year? Maybe scrap you landline. (watch you dont pay extra mobile bills if you scrap your land line!). Jog instead if Gym. Read magazines online.
After you have done this, write down your new target costs and work out the savings you will make (eg. £140 (current spend) - £40 (new target spend) = £100 savings)
d) After you know how much you can save on your set bills, write down some other ideas, like plan on spending £5 less per week on food shopping [click here] (saving £20 pm). Some other ideas for money saving can be read here. Next plan to cut energy bills, and other bills.
You can even do an extra hour per week overtime, which could go along way.
5. Stick to your plan for 12 months
Stick your plan up on your fridge, or somewhere to keep it in your mind. And stick to it for just 12 months. First thing you need to do it put the changes in place, like switching to a cheaper TV packages etc. Do it now. Start benefiting now.
After your 2nd, 3rd, 4th credit card statement, you will be well on your way to paying off your credit cards and really start seeing the benefits, and this should inspire you to continue!
Cutting back may seem like a bit of an effort now. But think of it like sprinting 50 meters to catch a bus, so you dont have to walk the 3 miles home from work.
After the year has flown by (!), you can re-upgrade the cut backs. Or if you feel you did fine without, then keep them as they are.