As an immigrant who moved alone to the U.S. from Jamaica at age 17, Jordanne Wells didn't know much about managing finances in her 20s.
She graduated from college with eight credit cards, and eventually found herself $30,000 deep in credit card debt.
While Wells had a steady income at the time and was already a savvy shopper — using coupons, buying clearance and generic brands — she realized her debt was holding her back from doing the things she wanted to do.
"The debt itself wasn't hurting me," says Wells, now a personal finance blogger at Wise Money Women. "I realized it was what I couldn't do because I was servicing my debt. That realization flipped a switch in my head."
Instead of just getting by making the minimum payments on her credit card debt, Wells decided it was time to make some drastic changes.
CNBC Select spoke with Wells about the six-step method she created — what she calls the debt "S-L-A-Y-E-R" system — that kick-started her payoff journey and helped her get rid of her credit card debt within a year. Here are the steps:
Step 1: Survey the land
The first step in Wells' payoff plan is to organize your debt. Gather all the details of your outstanding balances.
Make a list of who you owe, how much you owe, the interest rates, minimum payments and due dates. After you have all the information laid out in front of you, calculate how much your monthly payments are to cover your debt.
Step 2: Limit and leverage
In order to avoid any temptation to score a new sign-up bonus on a credit card, opt out of receiving any additional new credit card offers. Then leverage your current income as much as possible. This could include cutting back on monthly expenses, like subscription or streaming services, to have more money for paying off your debt.
Step 3: Automate your minimum payments
To keep your credit card accounts in good standing, you want to make sure you at least pay the minimum amount due on your bills on time each month. This will help protect your credit score as payment history is the most important factor in determining that important 3-digit number.
To make it easy, automate these payments so the money is taken out of your account every month on time and you don't have to think about it.
Step 4: Yes, you must pay extra and often
Wells credits her success paying off 5-figure debt in 12 months to the extra payments she made as often as she could. "No matter if it's $10 or $100, make the payment," she says.
Even if it doesn't feel like you can afford to pay much more than the minimums, know that every cent counts. Wells once made an additional payment of 60 cents toward her credit card debt because she knew every bit would help and as soon as she had extra cash, she put it right toward her debt. "I knew that if I didn't I would've spent it," she says.
Step 5: Evaluate the plan often
Once you get started on your debt payoff journey, track your plan to make sure it still works for your lifestyle and adjust as needed.
For Wells, she decided to open a balance transfer credit card so she could pay off her debt with no interest. Once she consolidated her high-interest credit card debt, she made a plan to pay extra every single month during the introductory interest-free period.
Balance transfer cards are a great way to save money while paying off your debt, since you don't accrue additional interest during the intro period. Most cards, like the U.S. Bank Visa® Platinum Card and the Citi Simplicity® Card, require good or excellent credit to qualify. The Aspire Platinum Mastercard® stands out for people with good or fair credit.
While you track your plan, it helps to keep an eye on your successes, too. Finance expert Sallie Krawcheck suggests carrying around an index card in your wallet and checking off when you pay off a chunk of debt so that you feel a sense of momentum in your payoff journey.
Step 6: Ramp-up when you 're ready
Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the CNBC Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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August 15, 2020 at 08:04PM
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The 6-step method that helped this 34-year-old pay off $30,000 of credit card debt in 1 year - CNBC
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