These five money hacks will help you shrink your credit card debt, fast.
1. Stick to a budget
At its most basic, a budget is the accounting of your income and expenses. If you’re paid a salary, your income will be straightforward and consistent. If you freelance, are self-employed or have multiple income streams, you’ll need to add up your invoices and make educated estimates for each month.
Next, tally up a realistic accounting of your monthly expenses. Start with major expected expenditures like rent, food and transportation, then work your way down to your discretionary spending like meals out, clothes, subscription services and entertainment. Subtract your total expenses from your total income. Anything left over can be put towards your debt (and savings if you have the room). If you spend more than you make, you’ll have to identify where you can cut your spending so you can pay down your debt and eventually build savings and investments.
You can simplify this entire process with a budgeting app like Mint or YNAB (You Need A Budget), both of which are free and also include financial education tools.
2. Free up money
Even if you have money left over in your monthly budget, the more income you generate, the more you can apply towards credit card debt. The quickest way to free up money is to cut your spending. Review your utilities, apps, subscriptions and other purchases to make sure you’re not paying for unneeded products or services.
Depending on your circumstances, you might also consider requesting overtime hours or asking for a raise, taking on a second job or starting a side hustle to raise funds quickly. Monetizing hobbies, like selling goods on Etsy or eBay, can also help boost your income. Not everyone is able to do these things, so be realistic with yourself about what you can or can’t do.
3. Pay more than the minimum
Each credit card statement shows a minimum payment amount you must meet to keep your account in good standing. Ignore it. Instead, strive to pay as much as you possibly can each and every month (while never paying less than the minimum).
You’ll be charged interest on what you owe, including your original balance plus interest. Interest charged on interest is called “compound interest,” and it’s the reason why a modest debt load can balloon in just a few months. Larger monthly payments will be applied to the interest—not just the principal—so you can slow compounding interest.