Getting paid is one of the best feelings I have each month (used to be fortnight, damn you new job!). It’s the one moment whereby I relish the feeling of having money; I feel motivated, buzzed, unstoppable and full of excitement at what the coming month will bring.
Until I realise that I owe money on my credit card and my pay cheque in its entirety is still nowhere near enough money to repay the debt in full.
Talk about a buzz kill. Not only is my buzz killed; it’s squashed, flattened, run over, jumped on and spat out to the side of the road. More like credit card road kill.
Breaking this down, my credit card is actually bringing me short term happiness (through purchases) and longer term unhappiness. It makes me realise that true happiness (when it comes to money anyways) is about not having a credit card debt; it’s about getting paid and knowing that money is unaccounted for and free to do great things with.
The options I have to realise this (credit card) debt free happiness are:
Breaking the credit card debt cycle
It’s obvious I need to stop spending on my credit card and repay the amount I owe. This is great in theory, but far harder in real life. To help break this cycle, I’ve set made five key changes:
- I’ve done a balance transfer for 12 months (to pay no interest for a while).
- I’ve setup my everyday transaction account as my primary way to spend
- I’ve cut up my (new) credit card to avoid temptation.
- I’ve closed my old credit card (post doing the balance transfer).
- I’ve setup a recurring monthly repayment that is three times the minimum.
While this strategy is clean cut and simple; it won’t pay off my debit instantly. What it does do however is give me 12 months of mental breathing space knowing I am not accruing any extra interest (via the balance transfer option) and I have my repayments on autopilot, allowing me to know it’s winding down the debt on a regular basis.
Further to this, I am embarking on a new mission
I’m starting to use the Acorns App to invest my small change. In the short term, I am going to let the app debit my account the small amounts of leftover change and invest. At the end of my balance transfer period (12 months remaining) I am going to withdraw the funds from my Acorns app and use it as a lump sum repayment to further close off and repay my credit card in full.
Based on my calculations, after 12 months I should have around $2,000 I can withdraw and put on my credit card (give or take the earnings or losses I make).
After my balance transfer period ends
I am going to cut up my credit card and attempt a credit card free lifestyle. I am also going to use the money that otherwise would have come out of my pay cheque (to repay my credit card) to invest and attempt to grow my wealth.
This means that not only will I have repaid my credit card, I will be in a solid savings pattern that will see my regularly investing into a nice balanced fund (via Acorns). The longer term view is to stop buying things (with debt) and start saving (and investing) so that my money has a chance to make me even more money.