Ways to Eliminate Your Credit Card Debt

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?

Minimizing Your Student Debt While In School

While it may be impossible for you to stay out of debt completely while you are in school, they are definitely ways to borrow less. Here are some tips for how you can minimize your debt while in graduate school. A special thanks to Darryl Dahlheimer Program Director of Lutheran Social Service Financial Counseling Service for helping me create this list!

• Live Like A Student: While you may be a graduate student, you are still a student so you should adjust your expectations accordingly. Think about how you can “live like a student” in every aspect of your life. This might mean living with roommates rather than getting your own place, forgoing a car and taking the bus or biking, cutting your food expenses by making rice and beans a staple of your diet, reducing your phone plan to include only the things that you need, and opting for a stay-cation in lieu of a more expensive, exotic vacation.
• Track Your Spending: Did you know that a $3 coffee drink five times a week can cost you $60/month or $720/year? Small purchases can really add up! Often times, we don’t even know where our money is going. Take up the discipline of tracking your spending. Write down each expense/purchase rounding to the nearest dollar. After a few weeks you will begin to see some patterns of where your money is going, knowing these patterns can help you cut excess spending.
• Discretionary Cash: One way I have found to cut my discretionary spending is to use cash. I budget a certain amount for discretionary spending each month (eating out, recreation, concerts, snacks, etc.) and take out the money in cash. I can spend the money on whatever I like but I only have a certain amount and when it is gone, it is gone. Using cash helps you to physically see where your money is going and how much you have left.
• Return the Money that You Don’t Need: Loan money is NOT FREE MONEY! It might be enticing to just take all of the money offered to you so that you can buy something new, but this will definitely hurt you in the long run. Make a budget of what you need for school and what you need to live on and don’t take out any more than you need. That being said, don’t forget to account for unexpected expenses so you are not stuck if something comes up like car maintenance or an unexpected trip.
• Adjust Your Schooling to Borrow Less: This may not be an option for everyone, but if you can you might adjust your schooling so that you don’t need to borrow as much. You might begin your education online, spread out your classes over time or find a way to condense your education to three years instead of four by taking advantage of summer classes.
• Hunt for Free Money: There is a lot of grant and scholarship money available from a variety of organizations and corporations. It is worth your while to spend some time searching for some of these hidden treasures. Even $500 or $1000 can make a big difference. Be creative by searching not only by your education area but also by your interests. You could be the next recipient of a canoeing scholarship! Check out fastweb.com to search for scholarships and grants.
• Get a Job: A job can help you take out less loans or even start paying off your loans. However, a job can also be dangerous if it overwhelms your schooling. Make sure you find a job that you can balance with your school work, there is no sense in accruing loans for something that you don’t have the time to invest in!
• Pay Attention to Your Loans: Keep track of how much you owe in both interest and principal. Some schools allow you to take out subsidized loans, if you have the option to shift some of your unsubsidized loans to subsidized loans you will save a lot of money in interest. Also, if you can pay your interest while you are in school that will also save you quite a bit of money in the long run.
• LSS Financial Counseling Service:Lutheran Social Service (LSS) of Minnesota offers free budget and debt counseling. They have expert coaching for student loans. They also have debt management plans to help people paying off Credit Card debt and avoid scams for a nominal monthly fee. Call their toll-free number 1-888-577-2227 to set up a phone appointment or an in person appointment at one of their three area offices. You don’t need to be Lutheran or a student to benefit from their services!

Join the Conversation: What strategies have you tried for minimizing your student loan debt while you are in school?

Frugal New Year’s Resolutions: Will 2012 Be Your Year?

Will 2012 be your year to become more frugal? Most people who make a list of New Year’s Resolutions will include at least one item related to spending, saving or sharing their money. Whether you are preparing to take on a daunting list or you haven’t even given a thought to New Year’s Resolutions, why not make a frugal goal for the coming year. Here are a few ideas:

• Managing Your Credit Card Debt: Do you struggle with credit card debt? This year you could create a plan to eliminate your credit card debt and begin paying your credit card bills on time.
• Increasing Your Charitable Giving: Often times charitable giving ends up being the last thing on the list when money comes in. Why not begin making it a priority? If you are more of a spontaneous giver, why not begin making your giving more consistent?
• Paying Off The Interest On Your Student Loans: This is immensely important because it can save you a lot of money in the long run, but many students don’t take advantage of it.
• Cutting A Bad Spending Habit: We all have bad spending habits, those little (or not so little) impulse buys that really add up. Whether you buy clearance clothes because they are a bargain but you never actually wear them or you over-indulge in pre-packaged foods, this is a good time to identify and begin cutting your bad habit.
• Creating and Maintaining a Budget: If you haven’t done this already, this is a great habit to form. For more information check out these blog posts on creating and maintaining a budget.
• Begin Saving Money: Savings really do add up even if it is just $20 per month. If you can take it out of your checking account by automatic withdrawal that’s even better, you won’t even miss it.
• Living Within Your Means: Challenge yourself to actually live within your means this year by being intentional about only spending what you are earning.
• Form Your Own Frugal Community: Get a group of friends together for a frugal party every month. Start a group that tries to find the best happy hour deals. Gather some people together to make homemade frugal gifts that you can use for any occasion.

I’m still trying to decide on my frugal New Year’s Resolution. What is your New Year’s Resolution for 2012?