By Jose L. Fulgencio
Several years ago during my lunch break at work I started calculating all of my credit debt because I was struggling to pay my bills. It turns out I owed $10,000 in debt. I stared at the number in horror. My stomach turned at the thought of owing that much money. That day I decided that enough was enough and took action. Here are the four things I did to get out of debt in four years.
Step 1. Write a Contract
When I got home from work that day I sat at my desk and wrote a contract to remain accountable. The contract stated that I would dedicate myself to paying off my credit card debt along with saving money because I was making a habit of spending and not saving. I signed the contract and placed it in a safe area where I could see it and not throw it away. Writing a contract created a visible commitment. It made the goal real and forced me to honor it.
Step 2. Consolidate
Several personal finance gurus advise that you should consolidate all your debt with one creditor so you can make one payment, and have one interest rate, to pay off. I couldn’t do that because my debt was so high. Instead my uncle gave me a loan to pay off the cards. I then paid my uncle $300 on the first of every month. If you do consolidate, be aware of the associated fees and that it’s a fixed rate, not variable, so it won’t get cost you more over time.
Step 3. Pay more than the original amount
A year into paying my debt a friend suggested I pay at least $50 more than the original amount bringing the monthly tab to $350. That extra $50 paid off. I finished my loan payments in 41 months instead of the original 48. That’s $2,100 I wound up saving.
Step 4. Earn more money
If your full time job only covers your expenses plus your debt, look for another way to increase your income. While I worked full time I started a part-time job as an adjunct teacher at a public university. The extra money went towards my loan payment.
Once I made the last payment, I felt a huge weight off my shoulders. I had done it and in less than four years! I also realized that I was the cause of the problem: I was uneducated about the interest accumulating on my debt which is what made it grow so exponentially. I imagined all the ways that $10,000 could have been better spent: buying a house, an investment or paying off my car. The experience was a huge lesson in managing my money.
Jose L. Fulgencio is an educator, blogger, podcaster, founder of #Save4You twitter chat, and startup founder of LDMS Media, a technology integration company. As an educator, Jose enjoys teaching others ways to succeed in their life goals, personal finances, and finding solutions to integrate technology in their classroom. Follow on Twitter @joseful