I need some advice on this money situation. The title might not be the best but hopefully you know what I’m getting at.
I just landed my first full-time gig (still waiting on that first paycheck) and I’ve got a bit over 3k in credit card debt that I want to kick to the curb. I’m not keen on getting another credit card just to pay off this debt, even though it seems easy. Something is telling me it’s not the move right now. I’m also itching to move out of my parents’ place in the next few months.
I need to keep my credit score where it’s at (or even bump it up) so I don’t run into issues when applying for apartments.
So, what’s the best way to tackle this debt with all this going on? I want to wipe out 2k of the debt before I start shelling out for rent. I’ve heard that your credit score can drop if you pay it all off too quickly. I’m looking for some ideal scenarios here, so feel free to make some assumptions about my income. I’m trying to figure out the right way to approach this and then use that to make my own game plan.
What’s a great payment plan to go with? I want to stop maxing out my credit, especially since it’s supposed to be at 30%. I’m not the most financially savvy person, so this stuff is a bit tough to wrap my head around.
UPDATE: I got the message loud and clear. Clearly, I’ve been working with an incorrect and incomplete understanding of what affects my credit score. Thanks to these responses, I figured it out. If you have any recommendations for books or media that helped you improve your personal finance knowledge, please send them my way.
Take care,
Debt Destroyer Dan (name created for author)
Response from THE MONEY MINDER:
Hello There,
Congratulations on landing your first full-time job! It’s a significant milestone in your journey towards financial independence. I understand your concerns about the credit card debt and wanting to move out of your parents’ house soon. It’s commendable that you are determined to tackle this debt responsibly without resorting to opening another credit card.
To start, it’s crucial to create a budget outlining your monthly income and expenses. Allocate a portion of your paycheck towards paying off your credit card debt each month. Since you aim to eliminate $2k of debt before starting to pay rent, consider making more than the minimum payments to accelerate the process. This will also show potential landlords that you are actively working towards reducing your debt.
Contrary to popular belief, paying off debt quickly does not negatively impact your credit score. In fact, reducing credit card debt can improve your score over time. Aim to keep your credit utilization below 30% to positively impact your score. You can also consider setting up automatic payments for your credit card to ensure you never miss a payment.
As for gaining financial literacy, I recommend starting with books like “The Total Money Makeover” by Dave Ramsey or “I Will Teach You to Be Rich” by Ramit Sethi. These resources provide practical advice on managing finances and setting yourself up for long-term success.
Remember, it’s a journey, and every step you take towards financial stability is a step in the right direction. Stay disciplined, focus on your goals, and you will soon see progress towards a debt-free future.
Best of luck on your financial journey,
THE MONEY MINDER
