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10 steps to reducing credit card debt in 2016

Wow. The year 2015 may have been the year of the sheep – gentle and calm – but it was a fast one! But the last part of the year was definitely more focused, and I laid in a course for a better money blueprint. I worked to reduce my credit card debt and bring in more money to save for investments.

This past week, I paid off credit card number 2! Yeehaw! An insurance check from an accident arrived, and it was deposited in the bank. But after careful thought, it was decided that a portion of that money should be put toward reducing credit card debt, as the interest earned was significantly less than the 4.99% interest rate charged on the credit card balance. That leaves one card with a balance of $4265.66 – at 0% interest and on a budget plan to be paid in full by July of 2016!

The year of the monkey begins on February 8th on the Chinese New Year – flexibility, confidence, creativity and wisdom. Since one of the keys to financial success is to be willing to look at other options for building wealth, flexibility is key. Sometimes the timeline doesn’t follow what you believe to be best. You have to be willing to toss the old plan aside and go for it.
monkey photo by Praisaeng of

My plan this past year was to pay off all my credit cards and begin to build my financial freedom fund to the point where I could offer a hefty down payment on a second investment home. I had looked at several homes over the past several months, crunched the numbers, and spoken with mortgage brokers. But although I have a great credit score, my life on paper looked bleak to the decision makers. So I focused on paying down my debt, and side hustling until I had no hours left in the day.

My plan worked. I started this blog with more than $11,000 in credit card debt on three cards. I now have $4265.66 of debt on one card, with 0% interest until August 2016. That is approximately $7000 of debt blasted to the heavens. I also created, and added to, a Financial Freedom fund that was designated for investments only. Separating my money into separate accounts made a world of difference – the dollars no longer mingled or wandered off unnoticed. I stopped looking at houses and knew that when the time and the bank balance was right, the universe would present the right house.

Credit cards, in my opinion, are not bad things. They can be great tools for financial success if they are used in the right way.
fireworks photo by David Balasa of StockVault

Eliminate Debt

To help you reduce debt and build funds in the Cash Crone way, here are some tips:

  1. Get cozy with the numbers. You must know how much you owe, to the penny, on each of your credit cards. Write them down, add them up, and take a long look at that number. Is it scary? GOOD! Fear brings courage, and helps you discover what is important. Stare it in the face. That debt number is your starting point. You have the power to make it bigger or smaller.
  2. Now that you know what your debt looks like, create a budget for all your expenses. Write everything down – on paper, so it becomes real to you. Take a look at those credit card statements to see just how much you are spending for things like groceries or entertainment. You may think you are only spending $400 a month on food – but when you add up all the extra trips for milk or bread, and that meal out every Friday night, you may have a much larger number hanging out in the plastic. Be honest and write down the real number.
  3. List your income. I mean list your steady pay from any full or part-time jobs you work on a regular basis. Do you work full-time, and also work as a bartender once a month? List both of them. The bartender job is no longer play money, Cronie.
  4. Compare your income to your expenses. Your balance may be in the black or in the red. Either way, you have to deal with it. Whatever the color, move on to the next step.
  5. Figure out where you can cut expenses – EVEN IF YOU ARE IN THE BLACK. Your mission is to reduce your spending as much as you can handle. Cut out unnecessary expenses – cable (really, it is unnecessary), extra phones, that second car that rarely leaves the garage, the gym membership you never use, eating out, etc. Learn how you can shave costs of utilities, gasoline, groceries, or insurance. Learn to love eating at home, and research low-cost recipes – Leann Brown’s “Good and Cheap” cookbook has recipes that will help you eat for $4 per day. We’ll look at specific ways to save in another post, but only you know where you can tone it down.
  6. Increase your income. You can bring in cash by selling unwanted or unused items, or work temporary, one-time or part-time jobs or side hustles. I listed a few ideas here. Be creative!
  7. The minimum payment for those credit cards should be listed in your budget – but don’t think you can pay it off  that way. As you reduce your spending, cycle that money into your credit card payment. Even a few dollars extra per month can make a difference. You may want to focus on the credit card with the highest interest rate, or the highest balance, or the one with the smallest balance so you can experience that feeling of accomplishment. Use the plan that works for you. I used a combination of all those methods to pay down my own credit card debt.
  8. Although many experts suggest paying off debt before starting any savings account other than an emergency fund, I didn’t roll that way. I split all income above the basic budget amount into categories. I take out any taxes due, then 50% of the remainder goes to paying extra toward debt. The last 50% is sent to in equal amounts to long-term spending account (vacations, etc.), investing, education, play money and giving. The last two are important. I feel that giving is very important, and this account allows me to donate to worthy causes but stay within budget. The play account is used for movies, the occasional dinner out, etc, so I don’t feel as though it is all nose to the grindstone and no fun. Again, you need to separate your income into the categories that work best for you, as long as you are aware of your money and how it is using its time!
  9. Don’t give up. You can do this! The change to money management and financial freedom is a new journey, and it won’t feel comfortable at first. But in a few months, when you start to see the rewards, you will feel energized.
  10. Be open to change.  Your goals may change as you go along. I sometimes diverted from my normal allocations and put larger amounts on the credit card debt. I decided to put off looking for a second house until I had all my credit card debt paid off. But… stay tuned….





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2 Thoughts to “10 steps to reducing credit card debt in 2016”

  1. Nice post.
    I like your comment that starting the journey is uncomfortable at first, and so very true. Changing habits is hard slog but when they are replaced by new habits the going is so much easier.

    1. Thanks, Peter! Changing our mindset about money is truly the biggest hurdle!

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