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11 Steps to Pay Off Credit Card Debt by 2021

In the years before the COVID-19 pandemic, debt was already a major problem for Americans. A Northwestern Mutual study in 2018 found that the average personal debt (excluding home mortgages and those with some debt) exceeded $38,000. Things got worse.

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1. Tally Up, Review and Analyze Your Debts

Consolidationnow says that the first step in tackling debt is to make a complete inventory of all your debts. He said, “Know what amount is owed, to whom and (where) you are with payments.”

You’ll need to look for any suspicious behavior as identity theft is a real threat. You can then take the time to examine your spending habits and patterns.

Nishank Khanna (CFO at Clarify Capital) said, “Take a hard glance at where your money goes and how much is coming into.” Understanding your financial habits will help you identify areas where you are spending too much and areas where you can cut back to save. Our spending habits often tell us surprising things about our relationship with money.

Dvorkin also stated that it is important to obtain your most recent credit report.

2. Create a Spreadsheet Budget

Rick Orford, personal finance expert for The Financially Independent Youngerman, said that the best way consumers can begin paying off their credit card debt in 2021 would be to create a budget spreadsheet. This will allow them to track their incomes and expenses. Start by reviewing their past three months of income and expenses, and organizing them in a spreadsheet.

Orford suggests that you separate your needs and your wants. He says that needs include things such as rent, mortgage, insurance, and so forth. “Wants” are those things that make us feel like the Jones’s.

Another way to look at this is to seperate essentials from non-essentials and to commit to only spending what is necessary. To keep yourself accountable and track your spending, make sure to have your spreadsheet handy.

3. Establish (or Keep Building) an Emergency Fund

Although technically this step can be included in the budgeting step it is so vital that it deserves its own step. Make sure to include a portion of your budget that will directly go into an emergency fund when you are creating the budget of essentials. This is not about being extra cautious, but it is helping you to avoid getting into more debt.

Khanna stated that it’s important to have money set aside for an emergency fund. There is still a lot of financial uncertainty, which will likely remain throughout 2021 due to the pandemic. If you don’t have one, it’s a good idea to start saving for your future. As financial protection, emergency funds are useful. When you don’t have enough savings, debt can become a survival mechanism. You can avoid getting into a situation in which you have to increase your debt burden to survive by having cash stashed away.

4. Ask your credit card providers how they can help you.

Talk to your credit card provider(s), if you are in deep debt and don’t see a way out. Although these financial institutions may not be known for their compassion, they do want to keep your business.

Marius Thauland, a Sumo Finas financial expert, stated that most credit card companies offer a reduction in interest rates if you have difficulty paying your bill. Let them know that you are having difficulty paying your debt. They may lower your interest rate for a time or waive late fees, to give you some breathing space.

5. Investigate Various Debt Relief Processes

After you have assessed your debt, consider options for debt relief. The nature and severity your debt will determine what options are available to you.

Dvorkin stated, “Seek out if you’re eligible for a balance-transfer offer.” This is a fast way to get rid of credit card debt for those with less than $5,000. Recent New York Fed Credit surveys have shown that credit card rejections are on the rise. This could mean that there are fewer balance transfer opportunities for people with income gaps and employment gaps.

Dvorkin recommends debt consolidation for those who have high minimum payments. Dvorkin stated that this is an option for people with credit card debts up to $25,000.

For people with more than $25,000 in credit card debt and poor credit, a debt management program may be a better option. “In June, the CFPB published its quarterly report on credit counseling and debt settlement trends. Dvorkin stated that this report predicted an increase in debt settlements as the economy experiences another economic downturn.

The final option is debt settlement. Dvorkin said that this option should be reserved for those who don’t care about credit damage and want to get rid of debt without going bankrupt. If there is no other option and you have received competent counsel, bankruptcy should be considered.

6. Consider Refinancing Your Mortgage, If Applicable

“Often, credit card debt accumulates and you pay a lot of interest every month. Melissa Cohn, an executive mortgage banker at Raveis Mortgage New York, stated that some credit cards can even be in the twenties in terms percentages.

If you own a home that has equity, you might consider a cash-out refinance of your home loan. This will bring you closer to the threes for interest payments and help you eliminate any outstanding balances. High credit scores can be negatively affected by high balances. This is why it’s a good idea to start repairing your credit. If possible, it is better to spread your debt over a few credit cards rather than to accumulate all at once. It is a good time to contact your lenders and find out if there are any lower-rate loans available. These deals will allow you to pay less in a shorter period of time.

7. You can set a deadline for debt relief — even if it’s far off

Calculate how long it will take to pay off your debt. You can start by looking online for a debt payment calculator. There are many options available, including this one from FinancialMentor. It doesn’t matter how far away it may be, it is important to keep the deadline in your mind once you have set it. It helps to cement the deadline as an objective.

R.J. Weiss is a certified financial planner who founded The Ways to Wealth. It’s crucial to establish a deadline when you plan on paying off your debts. You should update your deadline at the least once per month, based on your progress. It is difficult to stay motivated during the debt repayment process. It is difficult to stay motivated during the debt payoff process. This keeps you on the right track and helps you focus on what is important.

8. Prioritize which credit card you’ll pay down first

You should make the minimum monthly payments on all of your cards but you should only pay one card at a given time.

“Usually, start with the highest interest rate debt, and work your way down until you reach the lowest interest rate,” stated Tracey Bissett CFA, chief financial fitness trainer. “From a psychological/mindset point of view, it may be a good quick win to pay off a smaller balance on one card — this will give you confidence to keep going.”

Bissett encourages people to make payment as often as they can, and not only once per month. This “will reduce interest that continues to accumulate, since the principal balance will always decrease.”

9. You should stop using credit cards (as much as possible).

When you pay off a card, it is important to keep it off of the table. It’s gone. You should consider quitting using credit cards. However, if you do have to use one, make sure you only use it for necessities like gasoline or groceries. You should also be creative in how you pay.

“If your card has rewards, can you use them to pay your expenses, give them as gifts, so that you don’t spend any money, and/or to get the rewards? Then, you could sell them to fund your card balance. Bissett said. “Think about rewards such as gift cards or physical items like small appliances or electronics.

10. Get a support buddy

It can be emotionally draining to pay down debt. It’s normal to feel overwhelmed, and it’s possible to never get over debt fatigue. This is not something you have to do alone. You can hire a financial coach, or even a financial therapist, but the price tag might exceed your budget. If you are struggling, or feel that you could benefit from additional accountability, it can be helpful to let others in.

Sundin said, “Tell your friends and family that you are paying off credit card debt.” This step has two benefits: it gives you support and helps reduce temptations. You may also find another person doing the same thing. You now have a buddy to help you track your debt progress, and stick with your payment plans.

11. Patience! Change is hard

Bissett said, “Be kind to yourself.” You are likely feeling shame, guilt, embarrassment, or other negative emotions. This is normal and it’s not something you have to do alone. Most people who have credit card debt aren’t overspending. There are usually circumstances that have led to debt accumulation that you cannot control. These include job loss, illness or business failure, as well as a global pandemic.

You must remember, however, that you are not only paying off your debt, but also changing your financial habits. This takes courage, patience, and a lot of hard work.

Carma Peters, Michigan Legacy Credit Union CEO, stated that “Change is difficult; it takes really wanting to have another outcome (and) most people don’t change their habits.” You have to get so fed up with your current situation that you desire something better for the rest of you life. This is how you can make a change. It is a good decision to start exercising every day. The same goes for changing your financial habits.

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