Creating a plan to pay off $60,000 in credit card debt
Zero balance can be achieved, with due diligence
By Todd Ossenfort | Published: December 15, 2008
The Credit Guy
Dear Credit Guy,
I have $60,000 in credit card debt and only make $71,344 a year. How can I get out of debt in a short time? I am 58, and my husband is 60 years old. -- Carol
WOW! Sixty thousand dollars in credit card debt is no small amount to pay off in a short time. Let's hope that you are not living paycheck to paycheck, behind on your payments or short on extra funds to help with the effort. Just to get us on the same page, let's do some math.
A reasonable amount of time to pay off unsecured debt is five years or less. For you to pay off your balance of $60,000 in that amount of time, you would need to pay $1,335 per month for 60 months. The monthly payment figure is based on an interest rate of 12 percent. If your interest rate is lower or higher, your monthly amount would be less or more, depending on the rate. And, of course, this is assuming that you will NOT be adding any new charges to your balance.
So, your challenge is to establish a workable budget or spending plan where you can devote at least $1,300 per month to pay off your credit card debt. You may have to make some sacrifices during the years it takes to pay off your balance, but it will be well worth the effort to be out from under your heavy debt burden.
To begin, you will need to determine your monthly income and monthly expenses. Write down everything you buy and every bill you pay for one month to get an accurate picture of your expenses. Likewise, write down all your sources of monthly income. If you already have a spending plan, then you are one step ahead.
Now that you know how much money comes in and how and where it goes out, you have some tough decisions to make. As we have already established, you need to pay out $1,335 per month to reach your goal of being debt free in a short time. The only way to accomplish that goal is to trim expenses in other areas or add to your income. Balancing is the name of the game when it comes to paying off debt. You need to cut back on your spending so you can add more money to the other side of the scale and steadily decrease your credit card balance.
Keep in mind that in order to prevent additional credit card debt, you need to build into your spending plan a savings element for unexpected expenses. Most people who acquire high credit card balances do so because they use credit for major unexpected expenses such as medical bills, house or car repair, etc. Make saving a portion of your income a regular part of your monthly spending and it will help to avoid unwanted debt in the future.
Take care of your credit!
See related: CreditCards.com credit card payoff calculator
Meet CreditCards.com's reader Q&A expertsDoes a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Cancel new card to minimize impact on score – If you applied for a card offer received in the mail and shortly after you changed your mind, time is of the essence to close the account in order to avoid hurting your score ...
- Planning to buy a house soon? Keep unused cards open – Don't let the issuer close it, especially if you are planning to make significant purchases in the near future ...
- Should I sell my house to get out of debt? – If you're on a fixed income, buried in debt and have a house in a thriving real estate market, selling your property is one option ...