Are you feeling the weight of credit card debt? If so, you’re aren’t alone. According to data from NerdWallet, the average credit card debt per household is $7,027. Credit card debt is well-known for its high interest rates, which can make getting out of debt even tougher. If you want to get out of debt this year, here’s a step-by-step guide to creating a credit card debt payoff plan.

Step 1: Look at the actual numbers  

I like to say that the first stage of debt is denial. It’s hard to admit how much debt we’re in, so half the time we don’t even look. Unfortunately, to get out of credit card debt you need to face the facts and look at the numbers.

You want to do this for all credit card balances you have. Get a piece of paper and write down:

• The credit card issuer
• The monthly payment
• The interest rate
• Total balance
  

Having this in one place can give you the info you need to devise a plan. If you’re unsure of all of your credit card issuers, you can access your credit report at no cost to you at AnnualCreditReport.com. Your credit report lists your lenders. Keep all of that info in one place to refer back to. Step 2: Look at your financial picture

When you want to pay off credit card debt, how fast you pay it off will vary based on your income and expenses. So in order to devise a credit card debt payoff plan, review your total monthly income alongside your total monthly expenses.

You can do that by reviewing your pay stubs or direct deposit. It’s best to look at how much is going into your account. Many people know their gross salary, but aren’t accounting for taxes and such and seeing what’s actually going into their bank account.

Once you find your total monthly income, write that down too. Then, look at the past 30 to 60 days of expenses. You can go through each expense and add up the total while also labeling it as a necessity or a luxury.

Necessities are things you need like the roof over your head, the food you eat, insurance, and any transportation costs. Luxuries are those expenses you could live without. Yes, Starbucks, clothes shopping, and Postmates add to your life but you don’t need them.

You don’t have to go full-on monk and never pay for any luxuries while paying off debt. But you do want to know where you can cut back or which line items you can slash altogether. Expenses labeled luxuries are where you want to start.

After this exercise, you should have your total monthly income written down, average total expenses written down, and a list of which items are necessities and which ones are luxuries.

Step 3: Cut back and negotiate

Getting out of credit card debt does require some sacrifice. The good news is that it’s temporary. The main way to get out of credit card debt is to pay far more than the minimum payment. One way to do that is to free up cash by cutting back on your expenses or eliminating them completely.

So go through your expenses list and ask what you’re willing to cut back or let go of? Even for just a few months. Then look at the remaining expenses. Can you negotiate? I’ve heard success stories of people who have been able to lower their internet bill, negotiate rent because of the pandemic, and score lower car insurance because of less driving during the lockdown.

So your main three goals with your expenses:

1. Cut back
2. Eliminate
3. Negotiate
   

These steps aren’t necessarily easy or fun but are required if you want to get out of debt ASAP. If you want a debt-free life, you need to change your life and your expenses today to have a different tomorrow.

Step 4: Add streams of income

When you’re focused on paying off debt, focusing on your expenses is important. But something that is just as important is adding streams of income as well. Many people get sick of frugality or hit their limit easily. In order to make more progress at a faster rate, you need more cash to throw at the beast.

That means earning more. You can do that through a side hustle. So for example, you can do dog walking through Rover, drive part-time on Uber, sell creations on Etsy, offer digital products on Gumroad, and do various tasks on TaskRabbit and Thumbtack.

Plus, you can sell your used items. Get rid of the stuff that you don’t need and earn more by selling on OfferUp, Poshmark, Facebook Marketplace, and Craigslist.

Hit up your friends and family and let them know you’re looking for additional gigs and let them know what your skills are. Through side hustling and selling, you can earn more.

Depending on your job and where you’re at in your career, you can also negotiate your salary too. If you get a bonus or a birthday windfall of money, throw that at your credit card debt too.

Step 5: Look into balance transfers

As I mentioned earlier, getting out of credit card debt is tough because interest rates are so high. That’s why balance transfers are enticing. A balance transfer is when you transfer your current credit card balance to a balance transfer credit card.

These types of cards have 0% interest or a low interest rate that can help you pay down debt faster. Instead of all your funds going to interest, you can actually make a dent in the principal balance.

Balance transfers are good options if you have good credit. It’s important to be aware that these cards have promotional periods, such as six months or more, where there is no or a low interest rate. After that, the rate goes back to normal.

So you want to calculate if you can make a difference in your debt repayment during that time frame and if you have the credit score to get approved. A good credit score is in the 700 or above range.

This option should also be reviewed carefully. If your credit card debt stems from an overspending issue, and not a lack of income or surprise expenses, having access to another credit card could be trouble. If you feel confident you won’t get into further debt, it may be worth it. But do the math!

Step 6: Create a plan going forward

When you have all of your numbers, you want to come up with a credit card debt payoff plan. How much can you put toward your credit card balance each month? Based on your balance, how long will it take you to get out of debt? Write that date down and put it on your fridge to stay motivated.

During this time, only use your debit cards and cash to avoid any temptation to get into further credit card debt.

If you have multiple credit card balances, focusing on the one with the highest interest rate can be a smart move.

Bottom line

Credit card debt is tough to climb out of but it’s something that is possible when you take these steps. The main thing is to commit your mindset to the goal. Believe you can and will get out of debt and your behavior will follow. Know that when it gets tough, you’re sacrificing now, to be debt-free in the future. Imagine what you’ll do with all of that money once you’re no longer putting it toward your credit card payments. Let that motivate you to keep going.