According to data from the Federal Reserve, Americans’ credit card balances shot up $27 billion to $1.14 trillion in the second quarter of 2024. With inflation raising the costs of everyday expenses, life has become more expensive and many consumers are relying on credit cards to get by. Anthony O’Neal, financial author, recently shared his eight steps for paying off credit card debt, which we used as a guideline to help you with advice on how to pay off at least $1,000 in credit card debt.
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Step 1: Admit There’s an Issue so You Can Face It
When addressing any issue in life, you must accept that you have a problem to face it properly. You’ll want to take an honest assessment of your finances by doing the following:
- Go through your credit report. You want to review your credit report to ensure that everything’s accurate.
- Review your credit card balances. You’ll want to take some time to compile your various valances to determine how much you owe and the interest rates.
- Find out how much student debt you have. It’s crucial that you get the complete picture by listing out all of your debt.
The goal is to determine your debt so that you can start building a game plan for tackling it.
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Step 2: Remove Your Credit Cards From Your Life
Some financial experts aren’t proponents of drastic actions, but O’Neal said to take extreme measures if you want to make real changes. He explained that giving up your credit cards will force you to take your finances seriously, as you’ll have to learn about living within your means and prioritize saving. As you focus on paying off credit card debt, you’ll want to stop using credit until you get a handle on your spending habits.
Step 3: Create a Plan for Your Money With a Budget
Once you’ve figured out where you stand and removed credit cards from the picture, you’ll want to make a plan for your money with a budget that you can realistically follow. O’Neal’s preferred budgeting strategy is the zero-based budget. With this type of budget, you assign a role for every dollar you earn, eliminating frivolous spending. For example, if you earn $4,000 a month, the goal is to ensure that everything you spend or save adds up to $4,000 to arrive at zero at the end of the month.
You can use budgeting apps to track your progress so you’re not confused about how to make this budget plan work.
Step 4: Increase Your Income
There’s only so much money you can save through budgeting and you may want to add a new income stream. The goal is to find a side hustle or a part-time job that can help you increase your income to boost the amount you can allocate towards your debt.
Step 5. Try the Debt Snowball Method
O’Neal suggested using the debt snowball method for paying off your debt. With this system, you list your debts from smallest to largest. You continue to make the minimum payment on all of your debt accounts. However, you focus on paying off the smallest balance first through extra payments so that you can get a quick win.
This strategy is known for building momentum and keeping you motivated in the journey. Paying off your lowest balance first gives you tangible proof that you’re on the right track.
Step 6: Don’t Take On Any New Debt
You’ll have to fight the urge to open a new credit card or take out another loan. Any new debt you acquire will delay your journey to paying off your balances. The goal is to stay focused on your current debt by making payments and limiting your access to credit.
Step 7: Consider Refinancing Choices
Dealing with high-interest debt can be challenging, so you’ll want to consider your refinancing choices to help you save money in the long run. Some options here include a credit card balance transfer or debt consolidation loan. The goal is to find a lower interest rate for your debt and to simplify your payments.
Step 8: Stay Committed for the Long Run
The final step is to remember to do your best to stay patient. If you’ve acquired a significant amount of debt, it may take some time to pay it and it won’t always be enjoyable. The good news is that the end result will be worth it when you can live debt-free.
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This article originally appeared on GOBankingRates.com: 8 Practical Steps To Pay Off $1K in Credit Card Debt, According to Financial Author Anthony O’Neal
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