Wow, I can’t believe it. I once again find myself in credit card debt. I never thought that I would have to tackle this beast, but here we are. For the most part of 2021, every time I would have a balance on my credit card, I would pay it off completely at the end of the month. But, I find myself using my credit card more and more, including for frivolous things. It’s easy to slip into bad habits. Those bad habits have stolen money from my future self and so it’s time to get back to the basics So, in this post, I will take a look at where I am, and what my plan is to get out of credit card debt. So, without further adieu, let’s dive in.
Credit Card Debt Snapshot
Before I talk about my plan to get out of credit card debt, it’s important to first take stock of where I am. At present, my credit card balance is $4868.37. The minimum payment is $40. The interest rate is a WHOPPING 15.99% So this is high interest in my book and will therefore take precedent over other investment objectives.
That being said, I will continue to max out my retirement accounts, and I will not be touching my Driving for Dividends project. So, clearly I am not doing things in the optimal way. However, there is a method to my madness.
I know myself and behavioral finance is just as important to me as the math. I’ve already gotten into the good habit of maxing out my retirement accounts every year and so I don’t want to break that habit. In theory, I could use the income earned from the Driving for Dividends project to pay off my high interest credit card debt. But, I am trying to establish a good habit with rideshare, and so I don’t want to interrupt that.
My lousy spending habit got me in this mess, and my good spending habits are going to be what gets me out. So, in a nutshell, I will use the income from my paycheck to eliminate my credit card debt. I am confident that I can do that by the end of April.
I know myself and behavioral finance is just as important to me as the math.
No More Using The Credit Cards For Now
There is an old saying that when you find yourself in a hole, stop digging. The best thing I can do right now is stop using my credit card for everyday expenses.
So, the credit card is out of my wallet, and I’ve switched to a cash only budget. I’ve also found things to do to entertain myself that doesn’t include spending money. For example, I bought a Virtual Realty Headset (on my credit card) and that is motivating me to stay home and play games (that I pay for). But, in the long run, this is A LOT cheaper than going out and buying alcohol at the bars.
I’m also focusing on improving my skills on chess, and finding programs to watch on tv.
The point is that I use my credit card very sparingly! So, there might be the occasional charge here or there, but by and large, the credit card is out of my wallet.
Delay Paying Extra On My Mortgage
In order to pay off my credit card debt as early as possible, I’ve decided to delay paying extra on one of my rental properties. One of my long term goals is to have at least one house paid off by the time I retire. So, to meet this goal, I’ve been paying extra towards the mortgage.
What I’ve decided to do was divert $500 that I was paying extra on the mortgage towards paying off my credit card debt. Once my debt is paid off, then I will resume paying extra on my rental property.
As will be explained below, I hope to resume paying extra on my mortgage by May 2022.
Tax Day = Bye Bye Credit Card Debt
In a typical year, I get a refund from Uncle Sam at tax time. However, last year was one of the first years I had to pay money for taxes. Although I haven’t done my taxes yet for 2021, I am 99.99% sure that I’m going to have a HUGE tax bill this year. Yes, it goes back to the condo and how I had to purchase it. In a nutshell, I withdrew money early from my retirement account and, at minimum, I will have that 10% penalty to pay.
In order for me to afford my tax bill, I intend on cashing out my bitcoins. Depending on how much debt I have left on my credit card between now and tax time, I may have to cash out enough bitcoins to cover not just the tax bill, but also the remaining credit card debt.
Of course, cashing out my bitcoins will be a taxable event, but that’s next year’s problem!
Conclusion
In general, having debt is no fun, and having credit card debt SUCKS! So, my goal is to get rid of this as soon as possible, but without sacrificing the good habits I’ve developed. I didn’t build up this debt overnight (although I kind of did), and so it’s going to take some time to get out of debt. The faster I can get rid of this debt, the more of my money can go towards meeting my 2022 resolutions.
To help keep myself accountable, I intend to post regular progress on my debt payoff progress!
Finally, because all of my credit card debt is on one card, strategies such as the snowball method or the avalanche method is not really that helpful to me. But, where there’s a will, there’s a way, and right now, my will is for this debt to be gone by the end of April 2022.
What do you think of this post? Do you have any high-interest debt you are trying to get rid of? If so, how are you tackling your debt? Let me know your thoughts by commenting below.
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