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In the realm of personal finance nothing creates as much fear and loathing as credit card debt. There is a very good reason for this. With interest rates north of 20% in many cases even a small credit card debt can become a major burden for years or even decades if not addressed properly. Do you want a simple formula to quickly pay off credit cards? This is what I did to get rid of $60k worth of debt in just 33 months.

Get Your Priorities Straight
The first thing you need to do is prioritize your payments. There are two ways to do this:

1. Pay off the highest interest rate debts first
2. Pay off the smallest debts first

Both methods have their benefits. Debt help specialists will tell you that from a financial standpoint paying off the highest rate debts first makes the most sense. However chances are if you are in credit card trouble to begin with you aren’t that strong financially. Your spending is likely more emotionally based. And that’s where paying off the smallest debts can come in handy. It is more emotionally charged because you get quick results and start to set up a positive feedback loop. It makes you feel good to pay off those debts and motivates you to continue and even escalate your efforts.

Personally I used a combination of the two. I started off by paying off the smallest debts to make my list of outstanding debts smaller and more manageable. When I started I had 12 credit cards, but most of them had balances under $1000. Those were easier to pay off and gave me a great morale boost. It also has the benefit of freeing up cash flow since even on a $400 outstanding balance you are looking at a $20 minimum payment. Once I weeded out the small debts I was able to use that free cash to pay down the larger (and higher interest) debts more rapidly.

It’s easy to get started. Simply sit down and make a list of all your outstanding debts. List who you owe, how much you owe and what the interest rate is. You can also list the minimum payment for each debt if that helps you plan for the future.

Get Focused on Paying Off the Debts
I don’t mean just focused, I mean laser targeted focused. If you have $50k in outstanding debts don’t focus on the whole $50k. Simply focus on the first debt you are going to be paying off. If you are going the route of paying off the smallest debts first that might be just $400. It’s much easier to think about paying off a $400 debt vs a $50k debt.

Now look at your budget. You are going to budget the minimum payment for all of your debts, except the one that you want to slay. That one should get ALL of your free cash. If that’s just $50 or $100 a month so be it, that’s what you will pay until that debt is gone. Then you move on to the next debt, with the small difference that you now have all the cash you were using for the first debt + whatever the minimum payment is for the second debt. So if you were paying $100 on the first debt and a $20 minimum payment to the second debt you will now have $120 per month to pay down the second debt. This is going to begin accelerating your debt repayment. It goes slow in the beginning, but if you have a lot of cards like I did it rapidly gains momentum.

Increase Your Debt Repayment
If you are like most Americans (and Canadians) you probably pay for things that while convenient are not necessary. When you get serious about paying off your debt those things need to go. Dining out – gone. Expensive cell phone data plans – gone. Vacations – gone. Video games, new clothing, magazine subscriptions, girls/guys night out, maybe even cable TV – all gone.

I know it sounds extreme, but you are in an extreme mess. Cutting out those things and other conveniences can save you boatloads of money that can all go to get debt out of your life. Yes it will be painful to give some of these things up, but it doesn’t need to be forever. Anyway, do you really enjoy those nights out and vacations knowing that they are increasing your debts and causing you more pain? Swallow the bitter pill now and once you’ve gotten your debts out of the way you can reintroduce some of the things you miss the most. Chances are you won’t need to though because one side effect of your debt repayment is that you’ve gotten your spending under control as well.

A Strong Finish
With all of the improvements you’ve made to your spending habits your last debts could be paid off as quickly as your first debts, even if they are 10 times as large. Imagine paying off a $4000 credit card in 4 months or less. That is the power of controlling your spending and focusing on your debt repayment. And once that last debt is paid off you will be able to get a huge jump start of emergency savings and retirement investing with all that extra cash flow. Plus you can treat yourself once after you’ve paid off all the debts. This is one time it is ok to say “I deserve it”.