How to Make a Budget to Pay Off Credit Cards

You've decided that it's time to cut the cord on your credit cards and finally pay off the debt that's been weighing you down. Paying off your credit cards is an accomplishment, especially if you've spent more than you should have and are now shouldering a heavy debt. You may need to adjust the way you live or find a way to make more money to pay off your credit cards quickly.

Step 1

Lay out each of your credit card statements. Add the total amounts due on each card together so that you have a general sense of how much you owe. Record the balance of each card as well as its interest rate on the notepad.

Step 2

Figure out how much money you make each month by looking at your pay stubs and those of your partner. Also, figure out your expenses by totaling your bills and receipts from the previous month. If you already have a budget, use that to make your debt payoff budget.

Step 3

Set a goal for being credit card debt free. You should strive to pay more than the minimum due each month to pay the card off quickly and spend less money in the process. Look at your income and expenses and set an amount you are able to pay on the cards each month. You may want to use an online credit card calculator to help you see how long it will take to pay the debt based on the monthly payment you can afford and the interest rate.

Step 4

Trim excess expenses if you need to so that you have the money to pay off your credit card debt. It'll be difficult to adjust your lifestyle, but the payoff — being debt-free — will be very much worth it. If you absolutely cannot trim expenses, think of ways to earn a bit more each month, such as getting a part-time job.

Step 5

Divide the amount you want to pay each month into two and pay biweekly instead. When you make biweekly payments on your card instead of one payment a month, you end up spending less on interest since you make more payments per year, according to Elisabeth Leamy of ABC News. As an example, if you plan to pay $500 a month, make a half-payment every two weeks of $250 instead. You will end up paying $6,500 in a year, or $250 times 26 two-week payments, instead of $6,000 monthly, or $500 times 12 monthly payments.

the nest