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Your best guide in eliminating your $10K credit card debt.
Have you ever tried paying off a debt with no strategy? If so, then you know how discouraging it is when you make timely payments and only to find out you hardly made any dents on your debts.
I know because I have been there. My husband and I were making payments on time, even more than the minimum, but when I checked my statements, the total amount never seemed to budge.
I was doing it all wrong; I was attacking our debt but with no particular goal. That was when my husband and I sat down and came up with our game plan.
Once we have a concrete plan, we executed it religiously. Now we are on track on achieving our financial goals.
So in this post, you will learn some of the best ways on how to manage credit card debt of 10k. It will include the step by step guide and tips to be successful on your debt payoff plan.
How To Manage Credit Card Debt Of $10,000
#1 Set Your Long Term Goal and Short Term Goal with A Time Frame
One of the best ways to pay off 10k credit card debt is goal setting. It is very crucial in goal setting that you should have both a long term goal and short term goals.
And most importantly, you should have a time frame. Goals without the time frame are weak and empty goals.
They would be harder to achieve because you do not have the pressure to push yourself out of your comfort zone.
Long term goals can seem so daunting and can seem too far away to get to. But when you break it down into short term goals, you will be able to see your progress more clearly.
Short term goals help you stay on track to achieving your long term goal.
In this case, your long term goal will be to pay off $10K credit card debt.
Your short term goal can be $500 per month. Your goal time can be 12 months. Therefore, your goal will look like this,
“I will pay off $500 per month in order to pay off my $10K credit card debt in 12 months.”
This statement should be visible to you every day in order to keep you accountable and motivated at the same time.
Here is a challenge you can do to save $1000 in a month.
#2 Choose you Debt Payoff Strategy
After setting up your goals, it is time to decide which debt pay off method is perfect for tackling your $10K debt.
There are a lot of ways or techniques out there, but I would highly recommend the Debt Snowball.
I have used this technique, and it is more motivating than the other methods.
Debt Snowball lets you pay off the debt with the smallest balance first, regardless of the interest rate. This method will work for you if you are someone who needs quicker results as encouragement.
You can use this method will if you have more than two debts. Otherwise, if you have only one debt then you do not use this method.
How To Deal With Multiple Debts
If your $10k debt consists of multiple debts then it is best to use the Debt Snowball Method.
You can start applying this method by listing down all your debts and their corresponding minimum payments.
Then add up the minimum payments. The sum will be the amount you need to pay every month.
Next, rank them from the smallest to the largest balance. Your goal will be to allocate as much payment as you can to the debt with the smallest balance first while paying just the minimums on the others.
How To Deal with A Single $10K Debt
If your #10K debt is only from one credit card, I would recommend two ways to pay it off.
I only recommend this method if you have a really good offer like 0% APR, 3% or less transfer fee, and no annual fee.
If your goal is to pay off the $10K credit card in more than six months, you might be better off considering a balance transfer.
The key here is to make sure that the total balance transfer fee is less than what you will pay on interest if you are not doing a balance transfer.
If your APR for your $10K debt is 17%, you will be paying $141.6 on interest every month.
So for every payment that you put in, $141.6 will not be applied to the principal amount but rather to the interest.
And if you have a balance transfer offer of 0% APR for 12 months for a transfer fee of 3% and with no annual fee, your balance transfer fee will be $300.
So, if you plan to pay off your credit card debt in 12 months without using the balance transfer, you will be paying interest of $141.6 every month.
But if you will do a balance transfer, pay the $300 fee, and pay off your debt in 12 months, then you only paid $300 in fees.
Divide the debt by the time frame.
This is the simplest way to tackle your debt if you only have a single debt. So in this case, we will divide $10K by 12 months, which will give us $833.33.
The result is the amount that you need to come up with every month to be able to pay off your debt in 12 months.
However, take note that this amount does not factor in the interest rate.
You can check how much interest you will be paying by using the calculator provided by Bankrate.
#3 Set a Monthly Debt Payment Budget
Now that you have a method on how to pay off 10k credit card debt, it’s time to lay out the plan. You will now set up a monthly debt payment budget.
This is the amount that you will need to come up with every month.
A carefully planned budget for debt payment is an integral part of making you achieve your goal.
A good monthly debt payment budget should be realistic. The amount should coincide with your financial situation.
Do not set a payment budget that is way beyond your monthly income.
It is the perfect ingredient in setting yourself up for failure.
Another characteristic of a good monthly debt payment budget is comfortable. The amount should be within your range of income.
It should not take a huge chunk of your household income.
And lastly, a good debt payment budget should be challenging. The amount should not be too comfortable that it would not challenge you to push yourself out of your comfort zone to work harder and increase your monthly income.
Your monthly debt payment budget is a part of your short-term goal that plays a vital role in achieving your long-term goals.
So, how do you come up with a realistic, comfortable, and challenging monthly debt payment budget?
You have to have a monthly budget.
First, make your monthly budget. If you don’t know how to do that, check out Best Guide to a Monthly Budget.
After setting up your budget, you will be able to identify how much is left to allocate for debt payment and how much you will need to make extra.
Try to come up with an amount that is higher than the total minimum payment of your debt. If the total minimum payment of the $10K debt is $400 then make some adjustments on your monthly budget to come up with at least $500.
Look for some areas where you can cut back.
Once you know how much is left over from your monthly budget to allocate for your debt payment, you can now set a monthly debt payment budget.
If you are doing the debt snowball, your monthly debt payment budget should be 10-20% more than the total minimum payments.
So if the total minimum payment is $400, add 20% and the result will be $480, which will be the amount you need to at least come up with every month. Check out Debt Snowball for step-by-step guidance.
On the other hand, if you are dealing with a single debt of $10k and you want o pay it off in twelve months, your monthly debt payment budget will be $833 excluding interest.
Adding extra to the payment will help offset the interest. Check out how extra payment can reduce the time to pay off a debt.
Now that your monthly debt payment budget is set, you are now ready. The challenge is how you can come up with extra income every month to add to the debt payment.
How To Come up with the Monthly Debt Payment Budget
Track Your Spending
You can start by tracking your spending so that you will know where your money is going. I use Personal Capital for tracking all my expenses.
I love it because it tracks and categorizes all my spending after I link all my bank accounts.
Cut Back On Expenses
Once you are aware of where your money is going, you can now identify which areas you can cut back.
You can use Trim to lower your cable, internet, and phone bills.
If you want to learn more about how to cut back on expenses and save money, check out 101 Smartest Ways To Save Money Fast.
Increase Your Income
To increase your income, you can either work overtime, find a second or third job or sell your stuff.
If you want to learn the best side hustles that you can start, check out Ways to Make Money From Home.
#4 Track Your Progress
Now that you have a concrete action plan, you are now pumped up to start your debt payoff journey. You will be doing everything to meet your goal every month.
However, there will be times when the energy to keep working on your goals will be lower than when you first started.
As a result, you will find yourself unmotivated and unambitious. And it’s ok. It happens to the best of us.
To prevent this from happening, the best thing that you can do is to keep track of all your progress.
You can use a goal planner. You can write your goals, thoughts, reasons why you want to achieve your goals, and so on.
You can then look back into it when you feel unmotivated. This way will keep you focused and reminded of why you are working on this goal.
If you are using the debt snowball strategy, use the Debt Ditcher’s debt snowball tracker.
Another effective way to track your progress is by using visual progress trackers.
These trackers will show you how far away are you from achieving your goal and how much you have accomplished.
There you have it! Those are some of the best ways to pay off 10k credit card debt.
It’s true that $10,000 may seem to be a huge amount and seem impossible to pay off. But it is possible with the right strategy.
Are you ready to tackle your 10K credit card debt? Check out The Debt Ditchers Workbook.
Related Credit Card Debt Articles:
- How To Pay Off $15K Debt In Less Than A Year
- How To Pay Off Student Loans Fast
- How To Pay Off $35K In Credit Card Debt
- Best Tips To Pay Off Your Debt
- Best Debt Management Strategies To Help You
Thanks for this I am actually doing the Dave Ramsey snowball for our bills and have a future goal which makes me excited. I never thought about transferring balance so I will have to look into this.
Great job for taking the first step! Yes, transferring balance actually can have its benefits. It works when you need to buy a little more time. Thanks for reading. 🙂
Great tips for the masses!! 🙂
I agree you definitely need a strategy to pay off debt and a budget.
These are great tips. I am happy to be debt free now, but in the past, I was dumb with credit cards and got myself into trouble. I was able to pay it off my sticking to a really strict budget and working side gigs to make extra money. It took me a few years to be completely debt free, but the hard work paid off!
Wow! Congratulations on being debt-free!!! You are an inspiration. Thanks for reading.
I love how you said that goals without timeframes are “ weak and empty goals.” I agree that if you don’t have goals with deadlines then it’s going to be easy to get comfortable and not push yourself!
Absolutely! Thanks for reading 🙂