Pay Off Debt Archives - The Fed-Up-With-This Papers

9 Creative Ways to Pay Off Credit Card Debt

Credit card debt can be absolutely debilitating. I know two people who have had to declare bankruptcy as a direct result of being young and foolish with credit cards. Both found themselves in positions where their interest payments alone were more than they could afford each month.

As a result, they declared bankruptcy at a young age and have been trying to dig themselves out for seven years. Both wish they had come up with creative ways to pay off credit card debt rather than bankruptcy. They can’t buy houses, or get loans, one couldn’t even finish school as he couldn’t get a student loan.

I can speak from experience; at my peak I believe I had somewhere around $8,000 in credit card debt with about $200 a month just covering interest. I made some changes and have been credit card debt free for over 6 years.

1. Get Rid of Credit Card Interest

The first thing you should do, if possible, is ditch the interest. That $200 a month in interest alone I was paying, didn’t even touch the principal, it was just profit for the bank. What you want to do is a “Balance Transfer”. You’re just going to take your current credit card balance and apply it to a new credit card. There are plenty of 0% interest cards out there, find one with the longest term, this might be 12, 15 or even 18 months at 0% interest. I called the credit card company to help open the card and process the balance transfer. Then you simply take the total amount you owe, divide it by the 0% interest term and set up auto pay.

So for example:

$10,000 in debt

15 months at 0% interest

$10,000 divided by 15 = $667

By paying $667 a month you will be completely credit card debt free after 15 months and will have paid $0 in interest during that time.

Trying to pay off the debt without a balance transfer may require payments of $867 a month for 15 months, which is why this is such an important step if you can pull it off.

2. Sell Anything You Don't Really Need

Take a walk around your home, ask yourself if you really need all the stuff surrounding you. Realize that you’re pretty much paying interest on everything you own while you have credit card debt.

Do you have old video games that you never play? Would you buy them at 18% interest? Of course not, so why hold onto them? Sell them, take the money from the sale, and apply it to the credit card debt.

How about old clothes that you never wear anymore, you could take those to a consignment shop or sell them online. Then sell all the clothes hangers. Do you really need that end table or that wall décor? Sell everything and put that money toward the credit card debt.

3. Go to Garage Sales and Flip

This can really be summed up as “find a side hustle” but garage sales are one of my favorites. Even if all you can put together is the loose change under your couch cushions and bum $5 from a friend, you can still go to a garage sale and make money this weekend.

For those who don’t know, people at garage sales are typically looking to get rid of stuff, not make money. “One man’s trash is another man’s treasure” is most true at garage sales. It’s very easy to buy a few things for just a dollar or two and sell them online for $20+.

My buddy once bought a weird guitar made from an armadillo shell for $5 at a garage sale, it sold on eBay for almost $200!

My go to selling platform is always Facebook Marketplace, but you can also try eBay and Craigslist, or any of the new ones popping up.

4. Shop for New Car Insurance

This is one of my favorite creative ways to pay off credit card debt, as few people ever seem to mention it.

Do you have a car? If so you have car insurance. Now, when did you buy your car? If It’s been over 12 months chances are you’re over paying on your car insurance.

The reason being, vehicles depreciate rapidly. If you purchased a car 3 years ago for $25,000 it might only be worth $12,500 today. But you’re not paying insurance for a $12,500 car, you’re paying insurance for a $25,000 car. Call a competitor car insurance company and get a quote, if you’re happy with your current insurance let them know you got a quote but would like to stay with them if they can match it.

The first time I did this was for mine and my wife’s car, both were about 3 years old and I saved myself over $125 a month with that phone call.

5. Be Open and Honest About Your Credit Card Debt

Credit card debt can be embarrassing, even though just about everyone has had to deal with it. Let your family and friends know you are working your way out of debt and it’s a major goal this year.

Instead of birthday or holiday gifts ask for cash to help pay down the debt.

Your friends might stop pressuring you about going out to the bar after work, or if they do force you to come out they might pay for your drinks. Yes, it is charity. But let the people who care about you help you, once you bang this debt out you can return the favor.

6. Make Daily Payments Toward Your Credit Card Debt

You may be wondering “how can I make daily payments when I don’t get paid every day”. Well this is really about lifestyle changes. If you are serious about getting out of credit card debt you’re going to have to make some lifestyle changes and curb your spending habits.

There is a trick I used for my student loan debt, but it works just as well with paying down credit card debt. If you made a conscious decision NOT to spend money on something, take 30 seconds, go on your phone, and make a payment on your credit card in the amount you DIDN’T spend.

So for example, lets say I’m walking through the mall and I see a shirt that I LOVE. Normally I’d buy the shirt without thinking twice as it’s on sale for only $28. However, I’m trying to get out of debt, so I say to myself “NO! I don’t need it, so I’m not going to spend that $28”. Take out your phone and make a $28 payment on your credit card right on the spot.

This does a couple things.:

First, it helps keep you motivated as you see the credit card balance drop every day.
Second, it limits how much interest you pay each month.
Third, it prevents you from losing site of your goal if you see extra cash in your bank account and start getting cocky.

Even if you don’t put the full $28, toward the debt at least put something. Maybe put $14 toward the debt and reward yourself with the other $14. The trick here is to stay motivated.

7. Freeze Your Student Loan Debt

If you have student loan payments consider putting them in forbearance while you focus on paying the credit card debt. The reason for this is because all debt is not created equal.

In most cases, student loan debt is usually in the 4-6% range, sometimes even lower. Whereas credit card debt could be over 20% interest. By freezing the student loans and applying those payments to the credit card debt you’re actually saving yourself overall interest each month.

You’ll need to check on your particular situation, but if you find your student loans are under 6% and your credit cards are over 18%, you’re probably better off focusing all your monthly debt payments to the credit card.

Once your credit cards are paid off you can start making payments on your student loans again, plus you can add the amount you were paying toward the credit cards to pay them off even faster.

(Note: If you did a balance transfer and have 0% interest on your credit card you can skip this step, unless of course you need the student loan payments in order to pay off the credit card before the 0% interest period expires.)

8. Remember Dimes Make Dollars

In other words, you don’t have to make a huge sacrifice, instead find a couple small ones that you wont even notice, it’ll add up.

Do you need cable right now? Can you cancel your gym membership and just run instead? Are you paying $3 a month for some little subscription you don’t use?

Years ago I dove into my spending to find I was paying $15 a month for Docusign, $20 a month for a PDF editor, another $3 for a small subscription and $20 for a gym membership I wasn’t really using. Each one alone doesn’t seem like much, but all together that was almost $60 a month I really didn’t’ need anymore.

9. Make a Band-Aid Sacrifice

What I mean by this is do something grand to try and pay off the debt asap, rip it off like a Band-Aid.

If you are renting an apartment consider subletting it and move back in with your parents for a couple months. Apply every dollar of your rent payment to the debt then start over clean slate.

Do you have a nice car? Consider renting it out on Turo.com and either take public transportation or buy yourself the cheapest vehicle you can find while your nice car makes you money. Once the credit card debt is paid off, sell the cheap car and drive your nice car again.

Did you have a big vacation planned this year? Cancel it, put the $2,500 you were going to spend toward the debt and go on an even nicer vacation next year debt free.

Credit card debt sucks, but that’s why it feels so awesome to pay it off. Do everything you can to avoid the bankruptcy route, it can really be a penny wise but a dollar foolish. Both people I know who went this route wouldn’t do it again knowing what they know now. They would have made major sacrifices and just paid it off, they’re so much further behind now then they were with the debt.

Ultimately you’ll have to look at your own situation. There are people who make $20,000 a year with credit card debt and people making $200,000 a year with credit card debt. Who you are, what you make and what you can sacrifice will all determine what creative ways to pay off credit card debt will work best for you.

Student Loan Forgiveness is Unfair – A Moral Argument Against It

As someone who has been paying student loans for nearly a decade there are few things I’d like more then to have them eradicated on my behalf. With that said, I understand that these loans would have to be paid with tax dollars, essentially paid by others, and there is simply no reason or justifiable argument for someone else to pay my debts from a moral standpoint. In short, student loan forgiveness is unfair, not just for the tax payers but for future generations who wont have their loans forgiven and past generations who have already paid them.

Do not use the word “Fair”…

If we did our absolute best to make student loan forgiveness fair what would that look like? I find it difficult to continue writing with out asking additional questions as that’s all this promotes, more and more questions. Simply wiping all debts clean would be astronomically more unfair then simply having those who took out the loans, of their own accord, pay them back. Why should the decisions and debts of a generation fall on the shoulders of other tax payers who may have already paid back student loans of their own?

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Doctors vs ditch diggers

The first issue I see with loan forgiveness is the value of the education itself. A doctor may walk out of school with $300,000 worth of student loans, but in just a few years, they could be making over $400,000 a year. This is not a person who is struggling financially, it is part of becoming a doctor. Those who understand economics understand that the medical school debt is just part of doing business and a small hurdle in the grand scheme of things.

Is it fair to forgive $300,000 of medical school debt for the person making $400,000 a year while a ditch digger gets nothing because they lacked the confidence to even attempt higher education in fear of the debt that may be associated with it? Or perhaps the ditch digger did go to school to be the best ditch digger they could be, but their student loan debt is a mere $3,000. Why should the doctor be given $297,000 more in debt forgiveness then the ditch digger? Perhaps instead of education the ditch digger took on debt to start their own business, learning not from books but from experience. If we’re willing to pay off the doctors debt shouldn’t we be willing to pay the ditch digger’s business loans in the interest of being fair?

Savers vs spenders

Just because someone does not have student loans does not make them or their family, rich. To the contrary just because someone has student loans does not mean they are not rich and could not have simply paid them off. This comes down to priorities and choices, savers vs spenders.

For example, a mechanic could be contributing 10% of his pay every year to a 529 plan for his child’s education. As a result, he is forced to drive a beat-up old car and cannot afford a vacation, he makes the sacrifices knowing his child will get an education. Now, assume his brother is a hedge fund manager who does not even bother with a 529 plan, he drives a new BMW and goes on lavish vacations. The mechanic’s child goes to a cheap school to save money, the hedge fund manager’s child goes to a top school as they have never really been taught the meaning of a dollar. The mechanic’s child has no student loans because of the sacrifices of the father. The hedge fund manager’s child does have student loans which they could have paid in full 10x over, the hedge fund father just pays them each month for the child. Suddenly congress approves student loan forgiveness and the hedge fund manager’s child’s debt is wiped clean. The mechanic gets nothing for his years of sacrifice, his child is worse off because they do not have as “good an education” as their cousin because they were being responsible.

Shouldn’t the mechanic be entitled to those educational costs back? The hedge fund manager could have easily saved, but simply chose not to. The result, the rich hedge fund manager is rewarded for being irresponsible, their child has learned nothing and has a great education. The mechanic was punished, his taxes in part paid for the hedge fund manager’s child’s loan forgiveness. This is why student loan forgiveness is unfair, in what world does this make sense?

Today’s forgiven and tomorrows forgotten

How would you feel if today, congress decided to forgive all student loans, but you were not graduating until next year? What happens to the graduating classes of 2021, 2022, 2023? Did they just miss the cutoff? This creates a paradox and a never ending cycle of “forgiveness”. You can’t forgive this years graduating class and not next years. You would then end up with “free college” which nothing is free. Someone is going to have to pay for the facilities, the utilities, the insurance, the upkeep, teacher salaries, etc.

Simply not charging tuition is not possible, so this would have to be funded by tax payers, I’ll tell you right now there aren’t enough tax payers alive to fund every college education and please don’t think the rich are the answer, the numbers don’t add up. $1.5 trillion, the number of outstanding student loan debt, is a number you cannot even begin to wrap your head around, but I digress this is supposed to be a moral argument.

What have you learned

College is supposed to educate. If loans are forgiven it teaches a horrible lesson in terms of responsibility. There was no one forcing a student to go to a particular school. There is nothing wrong with a community college for 2 years and transferring to a state school. We must be realistic here, who’s fault is it if you have $100,000 in debt for an art major? Why should the poor choice of a student fall on anyone but the student? If you are in a hole you cannot get out of it’s time to stop digging and look for a ladder. Change your career, work extra, sacrifice, and figure it out. This is YOUR debt. The irony here is that college graduates with worthless degrees are demanding that student loans are unfair. What about paying back a loan that you took out on your own accord is unfair? Student loan forgiveness is unfair, not paying back YOUR loan.

Instead of marching around holding up signs why don't you use that time to build a blog, get a certification to advance your career, or simply go to an auction to flip some items for large profits and actually pay off the student loan. You can learn how to do auction flipping and other ways to earn extra cash without getting a part-time job HERE.

There are better options

A clean slate of forgiveness across the board is a pipe dream, it is not realistic and will never happen. So, what are some other options to help the debt burdened get out of student loan debt and on with their lives?

Lower the interest rate. Interest rates are associated with risk. There is almost no risk when it comes to student loans so why are they 6% when mortgages are 3%? During the Covid-19 pandemic all student loans were lowered to 0%. I propose they never go back above 1%. There is no risk to justify a higher rate. It is the educated who will ensure our country continues to be prosperous. Reward them with inexpensive loans.
Allow all payments toward student loans to be tax deductible instead of forgiving. Currently, only paid interest is tax deductible and it is capped. Reward those who actually pay off the loan, let the full payment be a tax write off. If you are on income-based repayment and only pay back $2,000 this year you only get a $2,000 tax write-off. If you had a great year and a big bonus and decide to pay down $20,000 you’ll get a great big tax write off. It motivates people to not only pay down their debt but to get out of this income-based repayment plan.
Cap the total amount repaid. No one should pay $60,000 on a $20,000 student loan because they fell into the “income based” repayment plan. There should be a maximum cap in what you pay for your education. If you need a $20,000 student loan and 15 years from now you’ve paid $35,000 in monthly payments you should be done, regardless of your balance.

At 18 years of age you are old enough to make the decision to enlist in the armed forces, willing to fight and potentially die for your country. If you are old enough to make a decision like that you are old enough to make the decision to take on student loan debt and be held to that debt.

Student loan forgiveness is a fairy-tale politicians tell to try to earn trust and ultimately votes. In the interest of being fair, student loan forgiveness is about as unfair as it comes.