Yup you heard me right, I paid off $6500 of credit card debt over a 2 month period. Sounds kind of impossible unless you has some sort of nest egg or someone to loan you the money but the reality is I didn’t need any of that. Over the last two months I’ve had a plan in place to payoff all of my credit card debt once and for all, and in this article I’m going to share exactly how I did it.
Before I start let me just share with you the things I did not do in order to pay off this debt. First off I did not borrow any money from a lender, payday loan store, or even a friend. I did not rob it from my retirement or get it from some big emergency fund I had stashed away, because the truth is I don’t have much of an emergency fund right now.
So how in the world the world did I pay off all of my credit card debt so fast?
I Asked A Simple Question
Well it all started back around the end of April right after I started my budget on Mint.com, when I asked myself one simple question.
How Can I Payoff My Credit Cards Right Now?
From there I pulled up my budget and started throwing out all kinds of different ideas. I didn’t care if they were wrong or they were right, the only thing I was interested in was paying off all of my credit card debt right now.
Now I’ll be honest the idea of paying all of my credit cards off right away didn’t come to me immediately, it took several days of continuous thinking. Some ideas were really big from selling a vehicle to my new house to smaller ideas such as transferring all of my credit card debt to Lending Club Loan.
So how did I pay off all of my credit card debt over a 2 month period?
How I Paid Off My Credit Cards
The answer came to me when I started reviewing my life insurance policies, yes my life insurance policies. One thing I noticed about my life insurance was that it was a more expensive type of life insurance called a variable universal life insurance policy.
Now I’m not going to get into the specifics of the policy now but this type of policy has what’s known as a cash value account tied to it. These accounts accumulate money over time and depending where the interest rate is invested at can earn you some fairly attractive returns.
As it turns out I had a decent amount of money in these policies and if I were able to cash them out the money in those policies would easily pay off all of my credit card debt.
From there I decided to share the idea with my wife of cashing these policies out and switching to a cheaper type of policy that would be much more cost efficient and allow me to surrender the old policies.
After bringing the idea to my wife she and I agreed it was the best solution and the next day I called my insurance agent to get some quotes. A few months later I had the new policies in force and surrendered the old ones.
The Taxman Cometh
Now as easy and as good as all of this sounds one thing you need to keep in mind is that the taxman will want to get paid his portion as well. That means that any interest you earned on your money will be taxed at ordinary income so make sure you consult with your accountant before you attempt something like this.
In my case it was the obvious answer because the taxes are nothing compared to paying 24% interest payments each and every month. I can handle getting a little less at tax time if it means I won’t have to be making a minimum payment each and every month to the credit card companies.
How You Pay Off Your Credit Cards Right Now
In the end this plan has saved me years of payments, frustration, and interest, and I can tell you I’m in a much better situation now that I took the chance. Now it’s your turn, what could you do right now to payoff all of your credit card debt?
Here are the simple steps I took to make this happen.
- Ask Yourself The Question, How Can I Payoff My Credit Card Debt Right Now?
- List The Ideas. Next list the ideas. Grab a piece of paper and write down all of your ideas as they come to you and remember no idea is to stupid because you never know where it might lead you.
- Discuss It With Your Spouse. Third take some time to discuss the ideas with your spouse. Things will work a lot more smoothly when both of you are on the same page.
- Put A Plan In Place. Finally, pick the option that best suits you both and put a plan in place. Having a solid plan in place makes it much more likely that your plan will succeed.
Now that I’ve covered exactly what I did to pay off $6500 in credit card debt over the last two months I would like to hear your thoughts, was I wrong to pay off my credit card debt this way or do you think this was an awesome idea?
Also next week I’m going to be diving into how I switched my life insurance policies and what I switched to. So be on the lookout for that article next week. Till then I hope this helps you get the ideas flowing.