There seems to be so many different creative approaches that people follow in order to pay off their credit card balance. We decided to come up with
our own in order to eliminate $6,500 in credit card balance. To begin with, it is not that we weren’t already making payments to reduce and even eliminate our balance. We were. In fact, we were often making hundreds of dollars in payments every month if not in the thousands. Problem was 2015 was unlike any other year. It was full of weddings and other family social events that cost us money. Then we had the biggest event of the year and our life: having our first baby and you know they don’t come cheap these days! And if these two things weren’t enough, of course, as a result of having the baby, my wife was on mat leave which meant she only got about 55% of her income. The government did start paying us a monthly benefit for our baby but we had decided that we wouldn’t spend any of it. Each and every cent since his first payment has gone towards an RESP account (and so has every dollar that relatives and friends gave us as gifts for his birth and baptism)
Needless to say, it was a year in which our expenses matched, and even exceeded our income, given all these things we had to deal with. By late September, I was growing tired with paying so much towards our credit card, yet we were barely making a dent into it. As I told my wife, we were taking one step forward, two steps backward. For example, if we paid $300 towards the balance on Monday, something would come up on Tuesday and had to pay $400 for something or more than one thing (buying something for the baby, a bill that was due etc.) We had to do something about it. By October 1st, the balance was $6500, and we decided that we had to pay the full balance by Dec 31st, or just over $2150 per month. If Dec 31 was here and there was still a balance, we would use money from our savings to pay it off. The idea was that this would force us to pay as much as we can so we don’t have to take from our savings. It would also discourage us from putting any non-necessary expenses or spending on the card. As part of the plan, we also decided to stop putting any money into our savings account and direct it towards paying off the credit card instead. It didn’t make sense to put money in a saving account that pays less than 1% in interest while having a big credit card balance that charges us close to 20% in interest. This redirecting of money that would otherwise go towards saving to pay off the credit card balance, meant that we were now paying double what we were paying in the past.
And there you have it. All it took was a commitment. But wait, there is more to it. A commitment alone is not enough, unless someone is very strong willed. As part of the commitment, I designed a simple spreadsheet (called it ‘VISA Repayment Plan’) to track our payment progress, starting from the first and middle of each month (i.e October 1st , October 15, Nov 1, Nov 15, Dec 1, Dec 15, and Dec 31) On each one of these dates, we would update our balance and beside it, we would put an arrow: up, down or no change, indicating how much our balance had changed from the previous month. It is amazing what a powerful and magical impact that one sheet of paper had! We attached it to our bathroom door, so it was always in plain sight, thus reminding us of the task at hand. Just before Dec 31, our balance had been reduced to less than $1000 which we used our savings to pay off! So all in all, with little help from our savings, we managed to pay off $6500 in credit card balance in exactly 3 months. All in a year in which money was tight. As you can see, the main point here is commitment: if you have one, coupled with a clear timeline, and you stick to it, you will achieve your goal. You can apply this same principle to other objectives in your life such as ‘weight loss’ , ‘saving money’ etc.