Money and finances are things that I usually talk about on Ashley’s Bliss, but I’m making an exception! Why? Because I think there are a lot of people, especially other twenty-somethings, that can get overwhelmed with this whole debt and budget thing. We have student loans and credit cards to try and manage on top of you know just trying to live normally as a human.
When I graduated nursing school and started working as a nurse I was super pumped to actually have a decent paycheck! Finally! Whew! However, like most people during the struggles of school, I racked up some credit card debt in addition to student loans. So, I am going to tell you EXACTLY what I did to eliminate my credit card debt and start to save money. It worked for me and it can work for you too! It doesn’t matter how much debt you currently have. You will be able to figure out what works for YOU and determine how you can get out of credit card debt. No more paying interest to credit card companies!
Make a Budget
This part can be a little scary. I used excel because it’s pretty user friendly and it allowed me to map out my monthly budget. There are many free budget templates out there that you can use to help or you can do it the old fashioned way in excel (like I did).
First, I compiled a list of ALL reoccurring payments, such as bills, and their corresponding amounts. This included car payments, cell phone, rent/utilities…. you get the idea! Then I went through my bank and credit card statements to figure out how much money I typically spend on what. For example, I have a dog and I needed to include in my budget how much I spend on his food, medications and vet care. You MUST go through everything!! And I mean everything! Have a caffeine addiction? Include how much you spend on coffee per month. It’s so important to have an accurate representation of your monthly budget when you start this process. This does not mean you can’t change your spending habits. If you include everything you spend money on, you are giving yourself the opportunity to see where you can cut back or eliminate things that aren’t necessary right now.
Important: I did not include my credit cards in this budget section. I made a section for my credit card debt several columns away from my monthly budget items. I will explain why below, I promise!
Once you have your list put together, total the amount at the bottom. This number is important and I labeled it as “debt payments.”
Then, take a look at your pay-stubs. If you are a salary employee you can easily get an idea of your exact monthly take home pay. If you are hourly (like me) it’s a little more difficult and you can take an average of your paychecks to figure out your monthly take home pay. I always err on the side of caution with lower estimates to prevent any issues. Just in case! List your monthly take home (gross) amount. I even included a surplus/deficit row that subtracted the debt payments from the monthly gross. This simple calculation will tell you much you have left over each month OR if you have overextended your budget.
I created a list of my credit card debts several columns away from my budget obligations. The reason I did this was because I wanted to see it separately from my monthly budget to figure out exactly how much I needed to pay per month to eliminate my credit card debt. I set a strict date that I wanted to have $0 credit card debt. I did this by dividing my total credit card debt by the amount of months. For example, let’s say I wanted to be debt free in 4 months. You divide the total debt by 4. This number is how much you need to pay monthly on your credit cards to achieve your goal. It looked something like this:
This is just an example. You must determine what best fits your situation. You might have to reduce your monthly budget expenses, so you can implement your credit card debt elimination plan. In my case, I knew that in x amount of months my student loans would start and I would not have the same cash flow. So I made sacrifices in my monthly budget to be able to afford my calculated monthly payments to my credit cards and pay them off before my student loans started. It’s helpful to not use your credit cards while you are paying off the debt. Otherwise it turns into an endless cycle of playing catch up. Your monthly budget is truly the key to your success!
You CAN eliminate your debt! It requires commitment and being very meticulous with your spending. It is so worth it in the end! You will feel a sense of freedom when you no longer have to look at your credit card debt every month.
Good luck!! I would love to hear your stories of how you kicked credit card debt to the curb!