There is much to celebrate during the holidays, and I love fairy lights and hot chocolate and watching reruns of A Christmas Story as much as the next person, but just as I did last year I’d like to encourage everyone to focus on mitigating the financial damage the holidays often bring with them. No amount of gorgeous gifts under the tree is worth the long term stress and hardship of paying down the crushing interest of credit cards.
Being smart about money isn’t just about avoiding debt in the first place — it’s also about having the courage to make a healthy recovery when our spending does spiral temporarily out of control.
And she has graciously agreed to share some of her tips for eliminating credit card debt.
BACKGROUND: Desiree had decided to tackle her $15,000 in credit card debt head-on, and originally gave herself a timeline of 2 years to pay it off. During this time she lost her primary job and had to take a break from her plan, but despite the setback she ended up surprising herself by paying off the entire debt in approximately 12 months! Here are 5 great tips so you can aggressively tackle your debt and really have something to be thankful for next Thanksgiving!
1. Get your head straight and goals defined.
I kept telling myself that working this hard and sacrificing some luxuries would be temporary, and it really was! It was all about changing my thought process and the way I wanted to view my life. I tried to think of the money I was earning from these extra jobs as a bill that I had to repay to myself each month. Each extra dollar had to go directly towards paying down my credit card debt so that I could finally buy my freedom back.
It was really exhausting at times but in the end it was TOTALLY worth it.
2. Address outstanding balances on your credit cards.
Desiree had accumulated so much debt on her credit cards that the high interest rate alone was compounding every month to push her further and further into debt at a rapid rate that seemed impossible to escape.
She researched credit cards offering 0% APR for 12 months or longer and did balance transfers to move her outstanding debt from the old cards onto the new cards with 0% APR. In her case, she had to get a new card from Chase as well as a Discover card since her debt was too large to transfer onto a single new card.
Doing this essentially bought her 12 months to pay off her debt without worrying about more interest accruing. She also stopped paying for new purchases with credit cards altogether. She physically handed over her old credit cards as well as the new ones to a friend so that she couldn’t do any other damage and had no choice but to pay off the debt.
VERY IMPORTANT: Never use the new 0% APR card(s) for spending, and always pay on time or early. The whole point is to stop spending beyond your means and pay off your current debt — don’t waste this opportunity by accumulating more debt so that when the 0% APR period expires you’re trapped paying super high interest and end up worse off than when you started.
DID YOU KNOW? You can actually submit payments on your credit card(s) multiple times during the month. You don’t have to wait until the bill arrives.
THE TRICK TO 0% APR: Many 0% APR credit cards will consider approving a credit line for people with a “fair” credit score, which typically means your score should be ~600-700. When shopping for a 0% APR credit card you’ll want to look for these features ideally:
- 0% one-time fee (or really low fee like 3%) to transfer your debt from the old card to the new one
- 0% APR for 12+ months on the debt you transfer (aka balance transfer amount) since you want to be able to pay off your existing debt without accruing more interest debt
- 0% or low APR for 12+ months on new purchases although you should NOT be using this card to make any new purchases beyond TRUE necessities like your cell phone bill where you can’t easily pay cash. If you can pay via check, that’s still better than charging anything new to this new card
- No annual fee, or at least no fee for the first year (you can always cancel the card after 12 months to avoid getting dinged with a renewal fee which is usually about $100)
START HERE: We’re not financial advisors but to get a sense of what’s out there you might be interested to know that Discover is currently offering 0% APR on balance transfers processed before February 10, 2016. They charge a one-time fee of 3% of the balance transfer amount, but it may be worth it because a 3% one-time fee is far less than the 20%+ APR you’re probably paying right now. Read the fine print and decide for yourself.
3. Make hay while the sun is shining.
The second thing Desiree did was generate outside sources of income. Because she now had a 12-month grace period to pay down her debts thanks to the 0% interest, she took advantage of that time by making as much money as possible and dedicating all that extra income to paying off each credit card balance.
She worked a regular 9-5 job but also found work during nights and weekends. In her case, she would work almost daily from 9am until 1am, doing sales for a fashion showroom during the day and working nights/weekends as a bartender and server and even occasionally as a front desk assistant at a salon (to give her feet a break once in awhile):
“I know it sounds tiring BUT there was a goal I wanted to reach so told myself I will sleep once it’s all done. Even if it was a fast food job or a assistant job I would have taken it. I went to college and it required me to swallow my pride, and even though they didn’t pay much it was still money I could earn.
I also told myself that the time I would normally be home or out with my friends is valuable time I could instead use to earn more money, so I made it a point to ask my employers for any hours and as many hours as possible.”
Spending so much of her free time making extra money meant she had less time for going out with friends or shopping; it actually became easier to spend that money on repaying her debt and less tempting to spend on the things that propelled her into debt in the first place:
I also told myself that with the hard work I am putting in and the long hours I’m investing, it is just not worth throwing away that money for a moment’s pleasure when I can put that towards something that will offer a lifetime of less stress and more happiness over all.
4. Streamline your life.
Desiree decided to shed some spiritual clutter around the house and make a profit in the process:
I looked into getting rid of all the unnecessary things in my life. I’d post unwanted home items on Craigslist, and then I cleaned out my closet, bought a mannequin, and spent an hour here and there uploading clothes onto Poshmark & Mercari. Although I only did this sporadically, I was able to pay off a few thousand dollars worth of debt just from getting rid of things I no longer wanted or needed. Every month I would cash out my sales earnings and that money would go directly towards a debt bill.
I learned that the little things really do add up and it became a game for me! For example, I started recycling and once a month I would take all my empty bottles and cans to recycle centers and get paid out. My new philosophy was that any dollar counts and that little extra income could go towards my gas or home bills. I also created a “coin jar” where I would empty out my coins each day. It would get fuller and fuller and every few months I would cash it out.
Need a Mercari code? Try NKQHEQ for $2 upon sign up.
Need a Postmark code? Try PWOEW for $5 upon sign up.
5. Ask and you shall receive.
Last but not least, Desiree reached out to her existing service providers to negotiate better rates and lower her monthly bills. Many times a provider will offer some type of incentive or discount when you take the time to explain your situation, especially if they feel like they may lose you as a customer. Desiree specifically called her cable and internet provider as well as her cell phone carrier.
Don’t forget about car insurance either! Calling an insurance broker and having them shop around quotes on your behalf can often save you hundreds of dollars annually.
A little more about Desiree Mitchell…
Desiree Mitchell is a Los Angeles-based freelancer in sales and marketing, but she grew up in the OC and attended FIDM (the Fashion Institute of Design & Merchandising) where she earned a degree in product development. Her time at FIDM provided a springboard into the fashion industry and after graduating she began her career by working for several well known fashion brands like O’Neill, LRG, VOLCOM, PacSun, and Y&R.
About 4 years ago she relocated to Los Angeles to pursue a new job offer and better opportunities. Unfortunately her carefree life in LA proved to be a lot more expensive than she had anticipated and her credit card debt began to accumulate. At the time she was still focused on taking vacations and enjoying life with little thought about her financial future or the consequences of living too often “in the moment.”
Like many people who eventually find themselves deep in debt, her thinking was, “I will eventually get around to paying off my debts. What’s the hurry?”
Instead her debts snowballed out of control, and she almost gave up entirely before having a boss lady epiphany just over a year ago. It was then that she realized that she could sacrifice a short period of fun for a lifetime of worry-free financial freedom. She didn’t get into debt overnight, and it couldn’t be resolved overnight either.
As you can tell from the tips and tricks she has shared above, Desiree is truly a financial role model when it comes to will power and determination. Money mistakes happen to the best of us, but it doesn’t have to be a way of life.