Debt Free Forever – Adding Up The Debt

This is the second post in a series that will explore how you can become debt free, and stay debt free forever. Future posts will talk about when you should and should not use credit cards for purchases. Why you should care about your credit score, how to save money on every day expenses, will credit repair companies help you or hurt you and much more. Make sure to subscribe to our feed so you don’t miss a single installment of this series.

I hope you have read the first post and have made your commitment to become debt free forever. Last time we talked about the problem of debt, and of the fact that most people do not get an adequate financial education. With this post we are going to start into the real work of becoming debt free forever. And the best place to start is with credit card debt.

Credit cards are easy to obtain and easy to use. In fact, most stores will give you a discount on your purchase if you will sign up and/or use the store credit card. Why is that? Because they know that you will probably not pay off your purchases every month, and that they will earn more from you in interest charges and fees than the discount that you get.

It is interesting to see just how much a purchase made on a credit card can end up costing you. Let’s look at an extreme example.

Let’s pretend you have just took a wonderful vacation and charged the whole $2,000 trip to your credit card. After all, you work hard and you deserve a good vacation! For this example we’ll assume you are paying 24% interest on your credit card and paying the minimum payment, which is the interest charge + 1% of the balance. If you always make your payments on time, and you never charge anything else on that card, how long do you think it will take to pay off your credit card? It will take almost 20 years and you will pay over $3,500 in interest on your vacation! Wow!

What if you did it a little different. What if you planned ahead and saved for your vacation. Making the same payments as your initial minimum payment of $59.60 a month into a savings account it would take you less than 3 years to save $2,000 and pay for your vacation in cash. And that is not taking into consideration any interest you might earn on your savings. So, would you rather pay for your vacation for 20 years, or for 3?

Assignment:2 Find Out How Deep the Hole Is, Add Up Your Credit Card Debt

Go find all your credit card statements, we’re going to find out just how much credit card debt you have. No guessing allowed, you probably have more than you think. If just thinking about doing this assignment gives you a sick feeling in your stomach, do it anyway. Once you know how big the problem is, you can start fixing it.

For this assignment you can use pencil and paper, you can make yourself a spreadsheet, or you can use this debt tracker spreadsheet from

Across the top of a large piece of paper, make the following columns. Name of credit card, interest rate, initial balance, current balance, minimum payment, current payment. Then, fill in the blanks.

It should look something like this:

Name interest rate initial balance current balance minimum payment current payment

Now total the following columns. Current Balance, minimum payment, and current payment.
Now take a deep breath and look at the current balance number. Don’ let it stress you out, it is just a number. Good job! In my next post we are going to work out a plan for paying off your credit card debt. It may be just a little different than you think!

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