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The strategy I've used to pay $12,000 of credit card debt in 3 months

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  • During a move, I racked up about $20,000 in credit card debt. After the move, I got serious about paying it off. 
  • For two weeks of the month, I use my income to cover monthly expenses. The rest of the month, any money that comes in goes towards paying down debt. 
  • Using this plan, I've paid off about $12,000 in three months.
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This summer, my husband and I moved into a new house. We weren't in the most ideal financial situation, but we were in a good enough position to pull the move off in time to get our daughter into a great school system by the start of kindergarten. 

In the long term, this made sense financially, since we would have been paying $700 each month in private school tuition if we'd stayed in the district we were in (which we didn't feel met her needs). In the short term, however, it meant we were a bit strapped for cash. 

Enter, credit cards. Using credit when you can't cashflow a move is dangerous and controversial, but it made sense to us.

We expected a lot of expenses over the two-month period of the move. If we put it on credit cards, we reasoned, we could finance it for now and pay it off over the coming months when we started saving on tuition (which we had been paying for the past two years). 

Six months later, our debt payoff plan is going well. But really, it's not even a plan at all. 

The debt

In the lead-up to the move and the first month of owning our home, we wracked up about $15,000 in credit card debt. That seems like a shocking amount, but we weren't doing anything outrageous. 

About $5,000 of that was necessary repairs to our first home, which is now a profitable rental for us; another $5,000 went to pay for plumbing repairs that we had to do before we could live in the new house. 

There were other large chunks of money: about $1,200 for a radon mitigation; $700 for a home inspection; $600 to get our well up and running. Needless to say, moving expenses added up quickly. 

We already had about $5,000 in credit card debt lingering around. All told, when we moved into our new home we had about $20,000 in debt that we wanted to pay off as soon as possible. 

The income 

In the year before our move, my husband was a stay-at-home parent. However, now that our baby was 1 year old, he was ready to return to work. That meant that we were getting an income boost that we could target directly at debt.

While I was the only earner, we were able to cover all our expenses and pay down a small amount of debt here and there. When we moved, we kept our outgoing expenses about the same. So, we knew that we could cover living expenses on my pay alone and use my husband's income, plus the money formerly spent on tuition, to pay down debt. 

However, it's hard for us to set a hard-and-fast budget because I'm a freelancer and my income varies by thousands of dollars month to month. Plus, neither my husband nor I have ever done well sticking to a strict budget. 

The plan

We wanted to make sure we were paying debt down aggressively, without going the strict-budget route. So, I came up with a method that felt just structured enough for us. It involves taking two weeks to pay all our monthly expenses, and two weeks to pay off debt. 

Here's how it works: During the first week of the month I use whatever money comes in to pay our monthly expenses. This works because I always receive a few large payments on the first of the month. 

I start with the bills that are due early in the month, and work my way forward from there. We have a secondary checking account called "bill pay checking," which is where all of our auto withdrawals come from. During that first week of the month, I make sure we have enough in that account to cover all our bills. 

Once all our bills are covered, I focus on debt. Any money that comes in after the bills are paid is immediately transferred to pay off credit card balances. We started by targeting one of my husband's cards, which had about a $9,000 balance. Now that's paid off, and we're working on paying off all but one of my cards, wiping out relatively small balances of $500 to $2,000. 

We put incidentals like groceries, Amazons purchases, or a meal out on a specific rewards credit card. It may seem counterintuitive to use credit while trying to pay it off, but this lets us keep the block approach to our cash flow. Usually, I pay a chunk on that credit card each month, more than covering our discretionary spending. 

During the last week of the month, I leave any money that comes in in our account. That gives me peace of mind that I'll be able to cover the bills, even if a client payment is late.

The results 

My husband and I have been living in our new home for about four months, and we've paid down about $12,000 in debt. We're close to having our credit cards paid off. Once that happens, we'll keep the same approach as we move toward paying off student loans. 

I've never been a fan of debt-payoff plans that feel restrictive, which is why I love this no-plan approach. We're super effective in our debt payoff, without feeling like we're sacrificing anything. 

This approach works because we know we're making more than enough to cover our expenses. That extra income, coupled with our "no-plan" plan, has let us pay off more debt more quickly than we ever have before.

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