At the end of the 1999 hit film “Fight Club”, Edward Norton and Helena Bonham Carter watch as the skyline explodes and credit card giants collapse to the ground, instantly eliminating credit card debt for millions of Americans. While the average credit card debt per American household is a hotly contested issue, my 20 and 30 something friends watched the final credits of “Fight Club” roll (pun unintended) with no shortage of conspiratorial smiles and wistful sighing.
Although the image of a collapsing skyline doesn’t resonate with the same appeal in a post 9-11 world, many Americans, absent the collateral damage, would still be thrilled with the end result. Imagine this — you have just opened your credit card statements and the balances have all plunged to zeroes. And we’re not talking about a series of zeroes prefaced by a really high number.
But even though we can’t blow up buildings, there are solid methods by which we can detonate our debt. In a series of installments, you’ll meet my friend Oliver (not his real name of course). Oliver, now 27, has a well-paying job but can’t pay off his credit cards.
In each installment I’ll show him – and you – how to eliminate your debt step by step . It will be like “Fight Club” all over again if you can imagine that, just without the famous cast, the special effects, the…well, you get the idea.
My friend Oliver fits into the category of the Freshman 15 – the college student who puts on weighty credit card debt – by the time he graduated from college. Oliver’s case was even bigger than your average student’s – by the time he was a senior, Oliver toppled the scale with a hefty Freshman 50K in credit card debt!
A well-paying job and help from his folks helped reduce the burden, but at 27 years old Oliver still owes $17,050 to several credit card companies. He also finds that, in spite of keeping up with his monthly payments, he is making little progress in putting a dent into his debt.
The good news for Oliver — and for my readers — is that my five step program is easy to follow and focuses on things that you can do to save money and reduce your debt without paying a cent to the credit card companies. In fact, only one step directly focuses on paying back your creditors.
So let’s get started:
Calculate Your Debt to the Decimal Point
Before you can you even begin to attack your debt you need to know exactly how much you owe and what your interest rates are. This is difficult, if not impossible, if you don’t have it in a written format. A visual graph illustrating the balance per credit card and your credit cards’ Annual Percentage Rates is imperative.
This month you are going to go through all of your credit card bills and create an Excel spreadsheet that will look something like Oliver’s chart below:
|Name of Credit Card||Minimum Monthly Payment||APR||Balance|
|Credit Card 1||$150.00||18.99%||$12,000|
|Credit Card 2||$85||17.99%||$5,000|
|Credit Card 3||$15||19.99%||$50|
Keep in Mind:
- Twice a month, or whenever there is a major change in your balance, APR or minimum payment, make sure that your spreadsheet is up to date (checkout online finance organizer like http://www.mint.com).
- Set up reminders for yourself to check your spreadsheet in whichever way works best for you. For instance, you can create a reminder on your Outlook calendar and receive the reminder by automated email reminder twice a month.