What is the most effective way to pay off credit card debt? need help please!

When I was deep in debt I spent countless hours trying to find the most efficient way to pay off debt, this meant I wanted to pay the debt off quickly and pay the least amount of money to these credit card companies and loan companies. Unfortunately I could not consolidate and after speaking to a debt counselor I was not really eligible for any debt management plan.

I was in a position where I had to take control of my debt and then dig myself out of that hole. I turned to a handful or personal finance blogs and found The Simple Dollar made real sense, I could really connect with the blogger there who was in a similar position I was and he had managed to sort his finance and become financially stable, this man became a mentor to me.

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The Most Efficient Way to Pay Credit Card Debt

There is a big difference between efficiency and effectiveness, it might be quick to do something efficiently but will it having a lasting effect, it might the slow at first to do things effectively but there will be a longer lasting effect.

I found the most efficient way to pay off debt was to first of all try to reduce as much of the interest rate as possible for each of the credit cards or move a higher interest rate balance to a lower interest rate balance, once the interest rates and balances had settled the next step was to pay the minimum payments for all the debts and then throw all your disposable income to the highest interest debt so you pay the least amount in interest.

While this system can work for many people it might not work for all. I found this efficient method to not be very motivating. My largest balance had the highest interest and even after throwing money at the debt I found I was still getting nowhere psychologically. The reason was the debt was big and even though I was making good progress it did not feel that way, after a few months I was demoralized and threw in the towel.

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The Most Effective Way to Pay All Credit Card Debt

I started reading The Simple Dollar more religiously and I would recommend anyone who needs help with their finance to start with a great blog like this. Trent Hamm who is the main writer of the blog reviewed a personal finance book by Dave Ramsey called the Complete Money Makeover, it offered another way to pay off debt that really resonated within me, immediately I felt that this was the effective solution that I was looking for.

The system was to get a handle on the interest as discussed above and then list all your debt in order of size and then tackle the smallest one first even if it had the lowest rate of interest. The next step was to pay off the minimum payments for all the credit cards and throw all of your disposable income at paying the smallest balance off first, this way you see real progress and then when you’ve paid off the small balance you end up with more disposable income to throw at the next debt until you’ve paid all your debt.

This system really made sense to me and gave me the motivation to go on as I was seeing more progress; it was not the most efficient system however it was effective for me in the long run. I was so motivated to pay off my debt that I spent my leisure time thinking of ways to generate more income and slash my expenditure, I ended up giving up my cell phone, my car and even rented a room out in my home to get more money to get rid of the debt. This system compelled me and motivated me to remove this burden from my life.

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Effective/Efficient Ways to Pay off Debt?

So what’s the best way? It really depends on your character, I like to see progress and I want things to move quickly so the effective method will suit me better, some might want to see the total debt going down and paying less in interest really motivates them to pay the debt off quickly.

If you’re not sure which method suits you it’s best to take both systems for a trial run, see how you feel after a few months, if you’re feeling like you’re not making progress with the efficient method then you should try the effective method and see what progress you make.

Life after Debt

Life after debt is amazing, you feel free, you spend less time thinking about debt and more time thinking about a brighter future, my next step is to really pay off my biggest debt of all which is my mortgage through overpayments, having no debt or mortgage would be the next amazing feeling I’m looking to experience.

Financial independence would be the ultimate step, the concept is so beautiful and I feel great just thinking about it, just imagine having no debt and not having to make any mortgage payments, just imagine having enough savings so that you can live perpetually off the savings, you would have the freedom to do whatever you want to do whenever you want to do it.

Being financially independent is a long way away but clearing your debt really paves the way for financial success, the less holes you have in your income the more quicker you can build wealth which ultimately leads to financial freedom, I am not sure how long it will take but I know that this is the route I want to take and I am going to make it as fun as possible to get there, it’s about the journey and the destination, there might be ups and downs on the way but I look forward to seeing your there.