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Gregg Korrol, a self-described storyteller, life-coach and educator, and his family paid off more than $15,000 accumulated through credit-card spending by as he puts it, making the debt “feel real.” For Korrol, that meant cutting up the cards that had helped create the debt and resorting to the more tangible option of cash for just about every purchase.
The family then devised a plan that set aside the money they needed for the basics, and made one of those essential spending items the steady retirement of the debt.
But, in a tip that others might inspiring, the effort wasn’t all about austerity. To avoid feeling “punished,” as Korrol puts it, the family also set aside a specific budget for “fun,” using it to occasionally hit a movie or enjoy a (modest) meal out.
The legacy Korrol’s experience left with him included an aversion to paying interest except when absolutely necessary. Instead, he urges thinking about the better uses to which money being frittered away on credit-charges might better serve you, or those who are less fortunate than you.
This interview has been edited for length and clarity.
What was your total debt, and how did you acquire it?
As a family, we acquired approximately $15,000 of debt on credit cards.
Was the debt worth acquiring?
Debt is never worth acquiring, and while we made purchases that were wanted, we also found they weren't worth the debt they accumulated, because we found we were wasting money in the form of interest paid.
What motivated you to pay it off?
I was motivated to pay it off because it was a must. When you realize that you are basically giving away money for nothing (in interest), you come to realize how wasteful that can be, especially as you near a credit card ceiling or limit.
What was your plan to reduce your debt?
Yes, we created a plan. I applied the same methodology I would for people I work with in helping them to organize their life, or go after a goal. You start with a clear objective, in this case to eliminate their debt. The biggest problem people have with debt is that it is nebulous; you don't really see the money on a loan or credit card, so it doesn't feel real. The first step was making this “feel” real. We eliminated credit card spending and solely used cash.
So, for example, if you walk into a supermarket with $100, then that's how you balance what must be placed in your shopping cart. We also sought out a low-interest credit card (one with 18 months without accumulating interest), and transferred the balance to a new card, which we did not use for spending–hence no more interest was accrued during that period. While there was a transfer fee, it was far lower than what we would have paid in interest.
We then formulated a plan where we wrote down the things we needed (rent, food, car, etc). We then created a plan to “pay off the credit card” by paying a certain amount on its balance every month. Then, so as not to make it a hardship, we also left some cash for “fun” (e.g.: the unexpected; going out to events such movies, dinners, etc.). While paying off debt is a must, if you don’t allow yourself some “fun” spending money, you may feel like you are punishing yourself, and that's not the goal. The goal is to train yourself how to track and balance your spending continuously, so as not to create new debt again.
How did you stay on track?
Most people know what they have to do, the trick is using psychology and your mind to make it a “must” rather than a “should.” People come up with excuses as to why something can't be done. I teach people to focus on how to do the things they want to do, and to get those done.
How long did it take you to pay off the debt?
It took a little over a year to pay it off, which was approximately what was planned for.
What advice would you give to others struggling with debt?
You have to work backwards. You start with what you make, deduct the big necessities (mortgage, rent, car payments), then set a realistic budget for buying food; if you have children, a budget for them (including any classes they may take, like dance, etc); set a budget for the unexpected (inexpensive shopping, movies, going out, concerts), and also for savings. Whatever is left can either sit in your checking account to add to your fun the following month, or go towards your savings.
If you are not good with credit cards, don’t use them OR buy yourself gift cards. So, for example, you should buy a $100 Amazon gift card, say, which doesn't have a fee attached, and use that for online shopping.
How do you remain debt-free today?
For me, the thought of giving money away for free, if it’s not to a charity or someone in need, is ridiculous. Any time I think about interest I might be paying, I focus on how much better it would serve, say, a child who needs some books or a charity like St. Judes. The thought of giving money to something useful and helping others is a lot more incentive to me than giving money to a large company.
ValuePenguin’s Tips for Dealing with Debt
- Take inventory of your debt. Make a list of each debt with its monthly payment, interest rate and expected time to pay it off. Prioritize which debts to tackle first.
- Create a strict budget for yourself. Its aims should include reducing unnecessary spending, like eating out or shopping, and putting this extra money toward paying off your debt.
- Consider how you might increase your income. As an alternative strategy, or in addition to the strategy above, find a way to earn extra income to speed up the repayment process.
- Pay down more than the minimum amounts. Determine how much you can pay above the lowest monthly payments on your cards, since this will help you become debt-free much quicker—as well save on interest charges.
- Consider refinancing high interest debt. Explore getting a loan or balance transfer card with a lower rate to save on interest. You can read more about debt consolidation loans here. You can also try negotiating with your creditors to reduce the amount owed or the interest rate.
This content originally appeared on ValuePenguin.