It’s time to celebrate: I made my last credit card payment! That high-interest money sucker has been slain. How do you pay off a credit card? This episodes reveals the financial tactics I used to cut expenses, save more money and pay off the credit card debt as quickly as possible.
We’re on our way towards financial independence.
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I used a debt payoff calculator to figure out when I could finish payments on our credit card and other debt sources. If you have multiple sources of debt, then Nerd Wallet offers a pretty cool payoff calculator. I based my payments on a payoff date. And this calculator from Financial Mentor offers a pretty easy way to calculate payments based on a specific date.
If the Along Came Polly/throw-pillow references seemed a little out of place. Here’s some context:
Episode Transcript:
How I paid off my credit card
- This is the Bad-Ass Dad Pod
- The podcast for living our best lives physically, financially and relationally
- Right now… no matter what age we are.
- It’s a celebratory episode!
- Why?
- Because I hit a big milestone.
- When I started this podcast, I was setting out on three quests.
- I was going to dunk a basketball.
- I was going to stop taking my most important relationships for granted.
- And I was going to get out of debt.
- Well, I’m still working on that dunk.
- I’m so super-close.
- Like, centimeters close.
- It’s been a lot of fun getting this dunk training thing happening.
- As for the most important relationships:
- I think that is always going to be a quest.
- The more I work on it,
- The more I realize that there’s no finish line.
- Good relationships always take work.
- There’s no place for sitting on laurels in good relationships.
- So those two quests are in process.
- Actually, so is my 3rd quest: to get out of debt.
- BUT, I hit a HUGE milestone a couple weeks ago
- In that I paid off all of our credit card debt…
- Not totally debt free yet…
- But the biggest, nastiest dragon of debt has been slain.
- And in this episode, I’m going to recount the steps to doing it.
- It isn’t rocket science, for sure.
- But I found I needed to be reminded of these principles again and again…
- So whether you’re an old-hand at debt retirement… or just kicking the tires on that budgeting and and the debt-free life… this episode is valuable.
- Friend,
- My name is Ryan Dunn
- I am the slayer of the Visa Dragon.
- The despoiler of the AmEx Troll.
- The dispeller of the MasterCard Mythical Beast.
- I’m a Level 8 Gym Warrior
- A level 6 Relationship Ranger
- And a level 5 debt mage, sucka.
- And I want to help you level up as a debt mage, too.
- So let’s rock, my apprentice…
- Let’s rock on back to 2018, as a matter of fact.
- Summer of 2018, to be exact.
- The time at which I made a startling realization.
- Our family income was higher than it had ever been.
- My wife and I were each in our highest paying jobs ever.
- And yet, there was something fishy going on….
- You see, despite pulling in more money than we were accustomed to…
- We still faced the same old money problems.
- We were still stretching to make our dollars last until the end of the month.
- We always felt like we were one financially emergency away from ruin…
- Like if our car just blew up, we’d be screwed.
- And we had goals of things we wanted to do as a family…
- Like take a vacation to NYC or the Grand Canyon.
- And to buy a house…
- BUT, it didin’t seem like we’d ever be able to afford to do anything like that.
- We were pretty much just treading water, financially speaking.
- We werent’ going anywhere.
- We were just treading in deepr and deeper water.
- So I wanted to know what the hell was going on.
- Supposedly, we had more money coming.
- Yet we weren’t feeling any better than we were years ago… when we had far less money at our disposal.
- Where was all the money going?
- Ever asked that question yourself?
- It’s disturbing isn’t it?
- Well, here’s what I’ll guarantee you: it’s going somewhere.
- And it’s pretty likely it’s not going where you think.
- When I asked this question, I followed it up by doing the hard work of analyzing our expenses across several months.
- I thought our money was getting nickeled and dimed out.
- Like, I thought we were just kind of throwing money away on random purchases… like lunches out… and throw pillows.
- Actually, we do spend far too much money on pillows, in my opinion.
- There’s a movie where one of the characters calculates the time he spends removing and storing pillows from his bed.
- I feel that… I feel that so hard.
- That movie makes me want to cry… not because I’m laughing at the hilarity of the situation…
- But because I know that character’s pain.
- It is my pain.
- And if it wasn’t so futile to punch pillows, I would punch all the damn pillows.
- ANYWAYS, what was I doing?
- I tracked our expenses.
- And, for sure, we were nickel and diming money away at a considerable degree.
- Besides the constant stream of throw pillows–seriously, they were like Tribbles… they reproduced at an alarming rate… but each time they did it cost me 30 bucks.
- BESIDES the pillows, we were really throwing money away on random subscriptions.
- Like a barely used New York Times subscription.
- And an extra, unused, Spotify subscription.
- And subscriptions to so many premium streaming services.
- Actually, like the pillows, we still fight that battle.
- It’s funny, we thought we’d save all this money by cutting our cable and just doing streaming services.
- WELL, we you total up the dollars you pay for HBO streaming, Netflix, Amazon Prime, Hulu Plus… and whatever else… you’re getting hit just as hard in the pocket book.
- So one of our steps to tightening down the money siphon was to really address whether or not our subscriptions brought us the value we paid for them.
- For example, we had to ask: What are we watching on HBO and can watch it anywhere else?
- Like, could we pick up the one movie we streamed on HBO per month over at RedBox instead?
- The point was really to address if we were using the things we spent money on.
- Often, we found we couldn’t justify the expense… so those things went.
- So that was the nickel and dime stuff–random expenses that siphoned off a small portion of our income.
- But when I did the expense analysis, I found that there was one line item that was HUGE and was killing us to the tune of $1000 a month–nearly what we paid in rent.
- I thought our money was getting nickeled and dimed out.
- And that item was debt payment.
- Between credit card payments, car payment, and an old personal loan payment, we shelled out nearly 1000 a month in minimum payments.
- THAT crazy, right?
- That was a significant, well over double-digit percentage of our monthly income.
- So we could limit the nickel and dime stuff, but if we really wanted to get serious about becoming financially stable–and eventually financially independent–than those debt costs needed to be controlled.
- I started having daydreams out what an extra $1000 a month would look like.
- That’s like a vacation a month.
- It’s college tuition for our kid… you know, when you string a ton of those bad boys together….
- It’s a lot of guilt-free vinyl record purchases…
- And friend, to me, that’s a thing of beauty.
- Because I love collecting some vinyl…
- And I really look forward to the day when I can do that without feeling like a selfish ass…
- Speaking of being a selfish ass…
- I have always wanted to be a generous person…
- But I always felt like being extravagantly generous was going to really hurt my family…. Because we were on the razor’s edge of financial security every month.
- I wanted to give to benevolent without feeling like I was taking food out of my kid’s mouth.
- So many people have been generous to me over the years
- And I felt like I should be at the phase of life where I could afford to be generous to some young up-and-comer like so many had been generous towards me.
- An extra $1000 per month could make me benevolent Mr. Dunn.
- So many better things we could be doing with that $1000 per month than using it to pay debt.
- And here’s the real killer part of that debt…
- Most of it was for things we no longer own.
- That personal debt, it came out of doing some improvements to house we no longer owned.
- The credit card stuff?
- It was all to purchase stuff in the past.
- It was all for old trips.
- We were spending now to fund things we did years ago…
- Which, in hindsight, isn’t quite worth it.
- So let me throw this word of caution out to you…
- COVID restrictions are lifting and maybe you’re thinking about taking a trip.
- IF you don’t have the money in the bank to fund that trip, then don’t take it.
- Do you think 2025 you is going to like 2021-you very much when that future version of yourself is making those monthly credit payments?
- No, no he’s not going to have good things to say about you.
- So spare yourself the regret… and wait.
- I wish we had.
- Because if we had, we’d be $1000 a month richer.
- OK, you’re getting the point, right?
- Debt is bad.
- We had a considerable amount of it.
- And it was limiting us from reaching our future goals.
- Therefore, the debt had to go.
- Up to this point, we’d been making minimum payments.
- That’s right, the $1000 per month was just minum payments on our various debts.
- At the rate we were going, we wouldn’t done paying our debts until something like Fall of 2027.
- And, because of compounding interest, that would cost us thousands of dollars extra.
- That’s the killer part of debt… is that you have to figure that only a portion of your payment is going towards your actual debt.
- A significant portion is going towards paying interest.
- And the longer you take to pay something, the more interest you pay.
- So we found ourselves in the precarious position of wanting to eliminate our debt payments as fast as possible.
- There are a couple of ways to approach this.
- The first is to go after the lowest hanging fruit first.
- Meaning, you go after the debt you owe the least amount on.
- For example, maybe you own $7,000 on your car, but $12000 in credit card debt.
- You can eliminate that car payment quicker, so you begin making extra payments there to get it eliminated while making the minimum credit card payments.
- I went with a different approach.
- And it worked for us because of our specific circumstances.
- So we had three sources of debt.
- The totals of each debt weren’t all that far apart… so there wasn’t one that was going to be significantly easier to pay off than any of the others.
- They were all going to suck to pay off.
- BUT, there was one that I felt was more damaging than the rest.
- We had a credit card debt that had a high interest rate.
- I felt that was the most damaging to us,
- So we concentrated on paying that off first.
- You’ll probably want to concentrate on that credit first, too.
- Unless you have some pay advance loans or something with crazy high interest rates
- The credit card is likely your main money sucker.
- Therefore, it became our plan to kill the credit card as soon as possible.
- And that was how we paid that thing off sooner than 2027… and how we’ll be debt free by this time next year.
- And it worked for us because of our specific circumstances.
- So how did we get the money to start getting aggressive in paying that debt?
- The first is to go after the lowest hanging fruit first.
- Yeah, that’s the trick isn’t it?
- Well, that’s where the expense analysis I did became even more important.
- So I’m going to say that step one in eliminating credit card debt is to do an expense analysis.
- That is simply looking at all the expenses you incur over a couple months.
- And then identifying where your money is going.
- From there, you can decide what needs to get cut in the interest of frugality.
- And what can be moved around.
- In our case, we could get the superfluous subscriptions and some of the frivolous spending–like a lot of lunches from restaurants–and then use that money to make extra payments on the credit card.
- I went a little further actually.
- I set a goal to get the credit card paid.
- So I used an online calculator
- Where I entered in the amount I owed
- And when I wanted to get the credit card paid by
- And it kicked back a monthly sum I needed to pay in order to meet my arbitrary deadline.
- THEN, I figured out how to make that number work.
- Now, initially, I set my sights a bit too high.
- I was over aggressive in how quickly I could pay off that credit card.
- And I couldn’t come up with the money to make my inflated monthly payments.
- So I had to do some recalculation.
- That really was step two: Allocating extra payments.
- I figured out what we could cut from our budget and we then used that money for extra payments on the credit card.
- Now there’s a third, kind of hidden step here, too.
- And it involves setting oneself up to not use the credit card any more.
- We had gotten in credit trouble because we had no emergency savings.
- So whenever a medical emergency or car emergency came up–like needing to replace the serpentine belt and some rotors on the car–then we would have to toss out the credit card for payment.
- Our first step was actually to put money into savings so that we wouldn’t have to use credit the next time an unplanned expense came up.
- This might be more important than making additional payments from the get go.
- Because you can start making those additional payments on your credit card.
- But if your just upping your balance on the back-end because you have to keep using your credit card, then you’re not actually getting any where.
- So an important, and maybe overlooked, step in in this debt retirement process is to set oneself into a position where you don’t incur more debt.
- Let’s review:
- Steps to killing credit debt:
- Figure out where your money is going
- Reroute whatever expenses you can towards your goal
- Build up an emergency savings
- And last thing: give yourself some grace.
- What happens to many of us is that we start this plan, and then something sets us back… like we have to pay for a root canal out of pocket before we have the emergency savings built up…
- So we use the credit card, right?
- Some people might take that as a sign that the plan’s not working.
- We’re not going to do that.
- We’re going to take the hit, then keep on chugging… because that’s what a bad-ass does.
- You’re still bad-ass if you stumble.
- You’re bad-ass as long as you keep going.
- Now that the credit card is gone, I can take all that money I was paying on it and make additional payments on another debt–in this case, the personal loan.
- So now my payments there have doubled.
- Which, you guessed it, means I’ll pay that off in half the time.
- I was supposed to be done with it Fall of next year.
- Now it will be late this year.
- And then one day soon… I’ll have that extra $1000 a month in my pocket.
- Then… who knows.
- But it feels good to dream.
- It’s coming.
- Steps to killing credit debt:
- Alright, thanks for celebrating with me.
- If this episode on debt management and paying off the credit card has been helpful, then say so by dropping a review.
- Hit the subscribe button while you’re at it.
- My name is Ryan Dunn.
- The Bad-Ass Dad Pod is a weekly podcast
- We generally have a rhythm of alternating shorter and longer episodes.
- I got off rhythm in this case–that’s life, right.
- But we’re going to pick back up next week… ‘cuz that’s what bad-asses do, right?
- More conversation is happening in our Facebook group: the Bad-Ass Dad Squad.
- Join in the fun and support.
- It’s a good time.
- There’s also more information on becoming a bad-ass physically, relationally and financially over at thebadpod.com.
- Music is by Eyoelin.
- Talk at you next week.
- OK Bye.
Awesome job! I’m still working on my student loans from college. 😦
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