When it comes to reforming your financial position, eliminating credit card debt is on everybody’s list. The issue many run into, though, is not getting to it soon enough. Whether it is saving or spending, something always ends up taking first priority over getting rid of credit card debt.
This is a problem for many reasons, and it makes your financial efforts a real uphill battle. It is vital that you don’t add even more obstacles between you and your financial goals, as there are many already waiting for you.
So, here we will lay out exactly why you should make eliminating credit card debt your first priority. We will also have some tips for you on how to manage it when money is tight.
Everybody has different priorities, and most of them suck. So many things end up ahead of debt elimination on people’s lists, and it really is one of the biggest financial mistakes you can make. Saving is great, and you need to do it, but you don’t need the Incredible Hulk of savings accounts before you attack your debt. Getting $1,000 or so is plenty to take care of emergencies before you start killing the credit balance.
Home improvements, car upgrades, or “treating yourself” can wait until you have made serious progress on your debts. Spending should be the last thing on your list if you have credit issues. Sometimes even putting lower-interest debts first, such as your car loan, can hurt you. If you have $3,000 left on your car loan and $3,000 left on credit cards, pay off the cards first. A free-and-clear title is nice, but interest kills.
Why Credit Card Debt?
Credit card debt is unique to other common debts in many ways. Interest rates are extremely high, they compound every month, and the minimum payment often barely keeps your head above water. High-interest rates mean that every month that you wait, you bury yourself in extra interest payments.
In contrast, your car loan doesn’t change nearly as much month-to-month. This makes credit cards the most dangerous debt to hold onto. Just paying the minimum payment will usually leave you with a pretty similar balance every month. As a result, you end up paying monthly payments for years without making any significant headway. You might as well be throwing that money into your toilet.
How to Handle it When Money’s Tight
Eliminating credit card debt is easier said than done. The people who have the most credit card debt are often those who have the least potential of getting rid of it. If you fall into this category, it is time to tighten the belt. This means no more eating out (or much less), cutting subscriptions you don’t need, and maybe even taking up a new part-time or independent job. It also means no more credit card spending. Not even a little bit.
You cannot expect to get rid of your debt when you are adding more every time you see progress. Do everything you can to avoid credit card use, and any extra money after your $1,000 in emergency savings goes straight into debt elimination. Once you get rid of the debt, your monthly income will grow substantially. You won’t be paying the monthly payment on the card, and you won’t be getting more debt added in the form of interest every single month. That’s freedom, baby.
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