The average american who has a credit card has around $10,000 in credit card debt. So is it possible for the average american to get out of debt in 18 months? Lets look at the numbers… Basic math states 10,000 divided by 18 would be 555.56. That’s $555.56 a month is what you would have to pay each month to get rid of your credit card debt of $10,000 in 18 months. Do you not have $555 to pay each month? That’s okay, you don’t need to pay $556 your first month. Through the debt snowball method you can start with a lot less money and still obtain your goal of getting out of debt in 18 months. Here is how it works.
List all your credit card debts. From the lowest amount owed to the highest amount owed. Basic Example:
Amount Owed – Minimum Payment – Card Name
500 – $15.00 – Credit Card A
750 – $22.50 – Credit Card B
1000 – $27.80 – Credit Card C
2500 – $62.50 – Credit Card D
5250 – 157.50 – Credit Card E
Lets pretend for the sake of simple math. These credit cards all had an interest rate of 18%.
Using the debt snowball method. You pay your minimum monthly payments each month and the debt with the lowest owed. You pay your snowball amount to it. Whatever your snowball amount is. After your first credit card is paid off. You take the $15 you would normally pay towards credit card A and apply it to help pay off credit card B. Once you pay off credit card B. You take the minimum monthly payments for A & B + the snowball amount you started with and put that towards credit card c. ETC ETC.
If you paid your minimum monthly payments + $100 a month. It would take you 35 Months to get out of debt.
If you paid your minimum monthly payments + $200 a month. It would take you 26 Months to get out of debt.
If you paid your minimum monthly payments + $300 a month. It would take you 21 months to get out of debt.
So! The magic number for getting out of debt in 18 months for $10k in credit card debt in our example is $361 a month on top of your minimum monthly payments.
I know exactly what you’re thinking! That sounds great but! I don’t have $361 extra a month. I know exactly what you’re thinking. There is absolutely no way I can come up with an extra $361 a month. Yes, there is! You can do it. but how? Making hard sacrifices. Do you need cable tv for the next 18 months? Do you need to eat out of the next 18 months? Do you need a cell phone for the next 18 months? Can you carpool to work? Can you clip coupons & lower your grocery bill 20%? Do you need to start thinking about getting overtime or a weekend job? Absolutely. If you have a talent like playing piano maybe its time to start giving lessons. You’re only $361 a month short of your goal. If that’s what you want. You can do it.
So for those who want more math! Here is the break down.
$361 paying down your debts in the order listed above.
Month 2. Credit Card A is completely paid off.
Month 4. Credit Card B is completely paid off.
Month 6. Credit Card C is completely paid off.
Month 11. Credit Card D is completely paid off.
Month 18. Credit Card E is completely paid off.
So, $361 is a huge sacrifice. After month 2. You’re going to pay off that credit card & feel so good. You’ll feel much better month 4 and by the time month 6 rolls around. You’ve got a year left and you can taste the sweet sweet victory.
What we have found out from those who take this challenge seriously and try to get out of debt in 18 months. They normally figure out a way to get out of debt sooner than 18 months. Sometimes a heater breaks. or the car breaks down and it costs money. Those who really want to get out of debt won’t be discouraged and will figure out how to make it work. During this 18 month period is also an excellent time to actually use your tax return towards paying off your credit card debt! You know all those years you said you were going to do it and never did it!? Well, this is the year to do it!
Just remember. Your actions got you into debt. Your actions and your actions alone will get you out of debt. Just think. 2 years from now you could have a few thousand in the bank & planning that dream vacation and not worry about how its going to be paid for.