Do you have credit card debt piling up? Maybe you brought it with you to graduate school. Maybe you have accrued it during graduate school. Regardless, you have some debt that is eating away at you. Here are a few simple steps to help you eliminate your debt while you are in school:
- Take Stock of Your Debt: Figure out where you stand, honestly. Don’t estimate it. You can’t fix the problem if you don’t know the reality. Write down the total debt and the interest rate on every card that you have.
- Analyze Your Spending: Take an honest look at your income, expenses, and spending. Track your spending from the last few months. Are there ways that you could cut down your spending, even just $25 a month, to help pay down your debt? Every little bit adds up.
- Create a Budget: Create a new budget for yourself that is focused on debt elimination. Wondering how to create a budget? Check out this post.
- Generate Some Extra Cash: Look for ways to earn some extra cash. Sell a few of your items online. As a student, you probably have some old books that are lying around that you don’t plan to read again that you could sell. Do some odd jobs: yard work, babysitting, tutoring, etc. Give up something for a few months: eating out, junk food, Starbucks coffee, new clothes, etc. Put all of the money that you save towards your debt.
- Choose Your Payoff Strategy: There are two common payoff strategies. One is to put all of your extra cash toward the highest interest credit card while paying the minimum on the other cards. Once the first one is paid off, you will have even more extra cash to apply to the card with the second highest rate and so on. For more information about this method check out this article. Another way is to start with the lowest balance first, paying the minimum on the others. Though this is not the most cost effective it is certainly a great way to motivate yourself as you are starting out. For more information about this method check out Dave Ramsey’s Debt Snowball.
- Ditch The Plastic: During this time, hid your credit cards and just go with cash. It may seem archaic, but it is very wise. You spend 20% less when you pay with cash than when you use credit cards. This will also help you to keep on budget by only taking out as much cash as you need.
- Motivate Yourself: Make concrete, trackable goals so that you can watch your progress. Celebrate your little achievements along the way. If you gave up coffee, you might treat yourself to a Starbucks or if you gave up eating out you might treat yourself to a meal at your favorite restaurant. It is up to you! Just make sure that these celebrations don’t involve you spending outside of your budget or, even worse, using your credit cards.
- Get Help: Debt elimination can be very challenging, particularly if you have a lot of debt and/or you are dealing with many different credit card companies. There are many great debt elimination programs that can guide you through this process. I highly recommend Lutheran Social Service of Minnesota’s Financial Counseling Service. They have debt management plans to help people, not just Lutherans, pay off credit card debt and avoid scams for a nominal monthly fee. Another great resource is Dave Ramsey‘s debt management classes.
Join the Conversation: What are your tips for paying off credit card debt?