Debt isn’t hard to accumulate. Most of the population is in debt in some form. They may have a mortgage for a home, a car and student loan, and multiple credit cards. Some debt is essential to maintaining excellent credit. Having too much debt can work against you.
Excessive Credit Card Debt
Over a third of the workforce carries a balance on their credit cards. The average credit card debt is above 15,000 per household. Having this debt on multiple cards only compounds the problem. Four or five card payments each month can add up and that’s just making the required minimum payment due. Unless you can pay the balances in full each month, the purchases you make will end up costing you two to three times more due to added interest.
Eliminating Credit Card Debt
There are a few ways to eliminate your credit card debt. You can secure a quick personal loan and then have one lower, more affordable monthly payment. You can refinance your mortgage or apply for a home equity loan. Or, you can pay your credit cards off one by one starting with either the one with the highest interest rate or the lowest balance. Once you pay off one, move onto the next.
Poor Money Management
Some people are very good with their money, while others are not. Learning how to manage your money allows you to live a fruitful life. If you spend every penny you earn, it only makes sense that you won’t have any money saved to enjoy things like a vacation, a new car, or a home. Managing your money starts with a budget. Every household needs one to track their spending, monitor their debt, and allocate savings.
Benefits of an Emergency Fund
When you live paycheck to paycheck, you have no savings. Unfortunately, life is not predictable and things will happen that require money to fix. Without an emergency fund even something minor, such as the need for new tires, can cause you to miss a few monthly payments and lead to financial ruins. Take a small amount each pay period and put it into a savings account just for these types of occurrences.
Investing in Your Future
When you’re younger, you see retirement as something far, far away. However, the years fly by quickly and before you know it, you have nothing saved for retirement. If you’re counting on a Social Security check to make life comfortable, think again. Social Security will give you a down-payment on retirement, not fund it. Thankfully, if you start investing in your retirement now, you’ll have enough money to enjoy the same quality of life that you currently experience.
Learning to Live on Cash
With direct deposits available through most employers, many people use their bank cards for everything. Unfortunately, it doesn’t provide you with the reality of how much things cost. You don’t really figure it out until you go to balance the checkbook and discover several hundred more dollars spent than you anticipated. Paying yourself an allowance and learning to live on it is one way to open your eyes to how much that morning latte costs. Once your weekly cash is consumed, you wait until payday to receive more.
It’s expensive to live, especially if you’re responsible for others, too. Weekly food shopping trips for a family can run upwards of two hundred dollars or more. That doesn’t include essentials such as laundry detergent, toilet paper, and shampoos. Learn how to pay less for everything. Go online and see what store has the best price before purchasing anything. Use coupons when available and shop at the end of the season to enjoy additional savings.
Having large amounts of debt from multiple places can consume all your disposable income. Find ways to reduce or eliminate the debt and put money away for your retirement.