Creating a plan to pay off credit card debt

July 11, 2016 9:37 am Published by Leave your thoughts


Creating a plan to pay off credit card debt.

Without a plan, and self-discipline, it may be hard to pay off debt. But with a little direction and motivation, you can live free of credit card debt. Before repaying any debts, make sure you’ve prepared your monthly budget.

What is my monthly budget?

A monthly budget helps you figure to how much you can afford to pay towards your credit.

If you have Excel or a Microsoft account, try using our monthly budgeting form provided HERE or prepare a simple monthly budget using the following steps:

  1. Calculate your total average monthly family income. This includes income from employment, child support, alimony, GST, etc.
  2. Calculate your average expenses incurred each month. Make sure to separate reoccurring expenses, such as rent, cellphone and internet payments, from intermittent expenses, such as birthday gifts, car repairs and dental appointments.
  3. Calculate the minimum payments required on all your credit cards and loans.
  4. Subtract all your expenses and minimum payments from your income. The leftover amount is your net income. This is the amount you can safely use to pay back your debts.

Now that we know how much you can afford to spend paying back your credit debt, we can make a stable plan.

How do I know which debt to pay off first?

There are two methods to pay off credit debt.


  1. Pay off the lowest balance first:

Are you motivated by numerous small accomplishments? This method will reduce the “number” of debts you hold and help you feel that you’ve made positive changes towards your credit debt repayment. The smaller balances will also be easier and quicker to pay off.

  1. Pay the highest interest off first:

This method will save you money in the long run. If this is also the card with the largest debt, you should focus on paying this off first as it will take the longest. Don’t get preoccupied with paying off your smaller debts first. Although the small debts may go down, your total debt will be increasing due to the high interest on your larger debt.

Once you pick a method, make sure you stay on that path to reduce your overall debt. Write down which debts you are going to pay off first and make a spreadsheet showing the interest rate, balance and minimum payments. Allocate your available net income to the cards on the top of your list. Make sure to keep up with your minimum payments, and stay on track with your monthly budget so you don’t further in to debt.

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