New year, new attempt at whittling down all that credit card debt. (Damn you, in-store card with the sky-high APR!) But where the heck should you start, especially when debt comes in so many different forms? The answer: Try a debt cleanse. We caught up with Ashley Feinstein Gerstley, founder of The Fiscal Femme and author of The 30-Day Money Cleanse, to find out what this is and how to put it into action.
First things first: What’s a debt cleanse? Basically, it’s a chance to reset and take (honest) stock of your bottom line all at once. In other words, it’s easy to say: “My J.Crew credit card has, I don’t know, $3,000, $3,600 on it?” A debt cleanse is about specificity and buckling down on what you actually owe. (Your J.Crew balance is $3,467.18, btw.)
To start, you need to take inventory. Use Excel, a bullet journal, whatever organization system makes the most sense for you. List out the name of who you owe (whether it’s Bank of America or your mom), the amount of the balance, the annual interest rate (APR), the payment date, the minimum payment and the limit (if it’s a credit card). Yes, this feels stressful and scary, but it’s also a huge relief to have it all laid out, especially in one place.
Next comes the tricky part: You have to prioritize. Now that you know what you owe, you need to figure out how you’ll actually tackle paying off that debt. There are a variety of strategies to choose from like the snowball method (this entails prioritizing the smallest pieces of debt first), the interest rate method (also known as the avalanche approach, this is about paying off debts with the highest interest rate first) or the emotional method (this requires tackling a piece of debt that’s causing you a high amount of emotional distress first). Once you know your method, go back to your inventory sheet and put an asterisk next to your priority debt.
Now, your debt cleanse marching orders. For the foreseeable future, when it comes to debt, your plan is to pay just the minimum payments on all debts except your #1 priority. Everything additional will go to that top priority piece of debt until it’s gone. When you’re done with priority #1, you’ll move on to #2 and so on. (Just remember to be realistic about your budget and what you can actually put toward debt so you don’t hinder your cash flow and, ugh, go into more debt.)
2019 stress = lifted. Yes, you still have payments to make. But you’ve just mapped out a solid debt-tackling to-do list. Clear eyes, financial honesty, can’t lose.