Did your 2021 start off like mine? We had to put our golden retriever down (I know, the worst!) and replaced the alternator on my van. So, we had a pile of vet bills. My long-suffering husband took care of the van but we still had to buy the new alternator.
Luckily, we were able to cover those expenses, but I often like to run through what-if scenarios, which drives my husband crazy:
What would we do if we didn’t have the $1,000 to cover those expenses? What if we had to put it on a credit card? And couldn’t pay the credit card at the end of the month?
I tell you this story because it’s so easy to find yourself in $1,000 of debt — or more. However, don’t let it spiral out of your hands. Take these steps to relieve a small debt problem so it doesn’t blow up into a bigger one.
Step 1: Find out how much debt you really have.
I know this article promises a quick fix to squashing $1,000, but do you really only have debt to the tune of $1,000? When you start peeling back the layers of credit card debt and other consumer debt, you may realize there’s more than what meets the eye. Do you have payday loans (golly, I hope not — those can wreak havoc on your life) or student loans as well?
While you’re looking at your $1,000, you might as well pull out the balances for the other debt you have and make a plan to pay it all off.
Step 2: Commit to paying over the minimum balance.
You always want to try to pay more than the minimum balance you owe per month. Credit card companies want you to pay the minimum amount — but you don’t want to do that because you want to get out of debt faster using this method.
Why? Let’s go over a quick example.
Let’s say you have $1,000 of debt with a credit card interest rate at 13%. Let’s say you make the minimum payment of $50 per month. It will take you 23 months to pay off your balance and you’ll pay a total of $133 in interest.
Now, let’s say you make more than the minimum payment — $70 instead. It will take you only 16 months to pay off your debt and you’ll only pay a total of $96 in interest.
Paying off your balance ahead of schedule expedites your payoff process and can save you a lot of money in interest over the long term.
Step 3: Ask yourself how you can cut back.
What can you do to budget your already existing money so you can put extra toward your debt? Budgeting isn’t exactly the most exciting buzzword that ever existed, but you can make it more fun by using a budgeting app to see where you spend and how you can curtail it.
For example, Mint jolted me back to reality one day — I realized I was spending $250 a week on groceries! Most of it was junk food! Grocery runs (not to mention Target runs) can suck a lot of cash per week. And are you really using that gym membership?
Step 4: Ditch the plastic.
Did your credit card debt get you into trouble in the first place? If so, you want to part ways. Give your credit card to a trustworthy friend, put it where you can’t easily access it, or even cut it up if you can. Don’t give into the temptation to spend!