Credit card debt is one of the most expensive types of debt. Interest rates can increase quickly and your balance begins to complicate if you do not pay it until the end of the billing cycle. A 35-year-old man has experienced the one first-hand and now plans to pay $ 21,000 in credit card debt.
“I have no other emergency or savings other than my 401 (k),” he explained.
The debt is divided into three credit cards, each of which has been tossed to $ 7,000. He makes $ 700 minimal payments each month, but recently saved $ 5,000. He has no savings beyond those $ 5,000 and is not only $ 1,000 a month after all the expenses.
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Redditor received suggestions for snowball and long avalanche methods. The snowball method of debt involves the first payment of the smallest balance and the gradual removal of debts. Then you have less payments to worry about.
The debt avalanche method includes a credit card debt priority with the highest interest rate. This method allows you to save more money while the snowball method is for psychological purposes.
Anyone who advocates the snowball or the avalanche method of debt recommends that you put $ 5,000 in one credit card balance instead of distributing it to the three credit cards. One Redditor believed that it made sense to invest all $ 5,000 on a credit card while the other offered to stay $ 1,000 to deal with the minimum monthly payments.
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Either way, one of the credit card balance will go from $ 7,000 to $ 2000 or $ 3,000, which will make it easier to pay off. The debt avalanche method has a greater sense, since all three credit cards have the same balance. Get rid of the card with the highest April first.
The 35-year-old can review his finances and see how $ 5,000 a month becomes $ 1,000 a month. There may be some unnecessary costs and impulse costs, but it is more likely that it is a problem with income. In this case, the 35-year-old should get a second job in a short time.
Whether it is part -time or side bustle work, it is important for the original poster to carry extra money each month. It doesn’t have to be constant, but arranging a second source of income on top of the first will get it more quickly than the debt. He can repay one of his credit cards for two months if he can get another job.