When it comes to paying off debt, there are tons of methods you can find online, on YouTube on Pinterest, you can find tons of information. I’m a simple gal, I like to bring simple solutions to you, and everyone that watches my videos and read my blog posts.
I’m sure you’ll find all sorts of information out there and that’s great but it’s hard to sift through everything and that’s why on my blog you’ll be able to find A variety of ways to pay off your debt and I want to be able to offer different solutions so you can find the best one that suits you.
In this specific strategy I will show you how to pay off your debt within a given time based on the chunk method.
This method may be known to you as something else in the personal finance niche, but in my own way of calling it… is called THE CHUNK METHOD! In this method you are going to be able to pay off your debt using chunks of money at a given amount of time.
So let’s start with an example: let’s say you owe $5,000.
If you look at the chart below it will show you a chart (or calendar) showing the months between January and December we’re just using this as an example if we are starting from January, if you’re starting from another month you can substitute that right in.
| Jan | Feb | Mar | April | May | June | July | Aug | Sep | Oct | Nov | Dec |
Usually with credit cards the minimum amount that is due is $25, But in this example I’m going to increase that to $100 a month and I’ll explain in a little while exactly why I chose that number.
| Jan | Feb | Mar | April | May | June | July | Aug | Sep | Oct | Nov | Dec |
| $100 | $100 | $100 | ? | $100 | $100 | $100 | $100 | $100 | $100 | $100 | ? |
Now ONTO the CHUNKS! For most Americans that work for a company they usually get an end-of-year bonus sometimes it could be at the beginning of the year some businesses give you the middle of the year it all depends on the company you work for.
This method is specifically geared towards folks that get a year-end bonus or whenever bonus and for those folks that get a tax return refund in April or if you file later or before that whenever you get that refund from your taxes that is part of the chunk method.
Now let’s say you receive $3,000 as a tax refund and you receive a $1,000 bonus at the end of the year, the two chunks of money that you receive totals $4,000. If we take $5,000- $4,000 that we received you would be left to pay the balance on your credit card which would be $1,000.
| Jan | Feb | Mar | April | May | June | July | Aug | Sep | Oct | Nov | Dec |
| $100 | $100 | $100 | $3000 | $100 | $100 | $100 | $100 | $100 | $100 | $100 | $1000 |
Now you’re probably wondering what happened to the $100 per month that I was making on this card will let’s take a look at that remember 10 months out of the 12 months when we making $100 so that is $100 * 10 months =$1,000. That is why we reversed the process in figuring out paying $100 a month, we could eliminate $1,000.
Luckily this debt would be paid off in 12 months.
If you are pretty confident on the amounts you will earn or receive throughout the year regarding “chunks’ then you can easily predict how much your monthly payment should be.
Let’s add everything up:
$3,000 – Tax Refund
$1,000 – Year End Bonus
$1000 – $100 monthly Payments x 10 Months
————-
$5,000 = The end is near!
Yes you can do this too! Depending on your situation you can easily make this method a staple in paying down your debt!
Grab a shovel and let’s get digging!
Your Friend,
Navita P.
