Get Out of Credit Card Debt in 2009 – Part 3 Calculate Your Monthly Payment

In the last 2 segments, I offered you a few steps to get to know your debt a little better. Understanding your financial reality is essential to getting a handle on your debt. In fact, most people who are not burdened by debt of any kind, are the ones that keep track of the money coming in and out at all times. It’s really a key ingredient to financial stability.

We also talked about another key to getting out of debt—using a 0% balance transfer so you can pay down your debt, interest free. If you completed these first two parts, you should have some solid numbers and even a set amount of time that will allow you to pay down your debt without any type of interest! Now, let’s make 2 calculations.

1) The Ideal Situation:
Let’s say you want to pay a $10,000 debt off in one year, since the new card you signed up for gave you 12 months of no-interest. That means you would need to pay $833.33 every month—and you’d be out of debt in a year! If you can swing this, awesome! If not, don’t get discouraged, but do see how misunderstanding credit cards can dig you into a financial hole!

2) The Realistic Situation:
Okay, so $833.33 is more than your rent and there’s no way you can pay that every month. Determine a number that you can afford to pay every month, and commit to that number as your minimum payment for the year.

Never pay just the credit card’s minimum payment. Always pay more—what your pre-determined minimum payment is. If you decide today that you can afford to pay $300/month in 2009 to pay down your debt, then you must pay that amount every month. Even if the credit card only asks for $175/month. They don’t want you to pay down your debt in 12 months. They are counting on you to slack off, so they can charge you their regular interest rate. Don’t fall for it!

And if the credit card company is charging you a small interest rate on your debt, you cannot stray from paying OVER the minimum payment. Here’s why: as you pay down your debt, the interest rate is being charged to a smaller and smaller amount of money every month, which is why you’ll notice that the minimum payment gets smaller as you pay your debt down. If you keep paying your set number (in our case $300) per month, you’ll get ahead of the credit card companies and actually work your way out of debt.

So, that’s really all it takes folks. A little math and a lot of consistency—those are the keys to getting out of debt in 2009. Good luck!