No matter who you are, what your income happens to be or what lifestyle you choose, there is only one true way to accomplish your financial goals; control your personal debt. Even some of the “richest” people you might know, making a lot more money than you do, are drowning in debt and not as financially secure as you might imagine, simply because their personal debt is out of control.
Today’s blog will show you some of the best ways to keep your debt under control and help you accomplish any financial goals you might have. Enjoy.
First, know this; For every American household where at least 1 credit card is held, that household has just under $16,000 in credit card debt. The interest rate on that debt averages between 15 and 20%, which means that those consumers (and more than likely you) are paying an awful lot of money in interest, which accomplishes nothing for you financially.
One thing that most people don’t realize however is that having some debt is actually a good thing. For example, if you’re in debt because you purchased a home for yourself and your family, or took out student loans to go to college and now make a great living, that’s what could be considered good debt.
Of course today we’re talking about “bad” debt, like credit card debt. The fact is, most credit card debt is accrued purchasing things that you consume very quickly, like meals at a restaurant and vacations. What makes credit card debt even worse is that most people accrue this debt on their cards but don’t pay it off in full at the end of every month, which means that, over time, they’re not only paying interest on that debt, but paying interest on the interest.
If there’s something you really want badly but it’s expensive, like a vacation or the new mountain bike, save for a few weeks or months in order to be able to pay for it in cash rather than use a credit card. The reward will be much sweeter and the cost much less.
Of course the key is to control your spending and, for the vast majority of American consumers, that seems to be quite difficult. Many Americans spend with abandon, not pausing to think about the effect that their spending will have on their ability to actually pay that debt back. If there’s one thing that will help you to control your personal data, it’s spending less money. As simple as that sounds, it’s the hardest thing for most American consumers to actually do.
If you can get your spending under control, your next step is to pay off your highest interest debt. For example, if you have three credit cards and one is at 22% interest, the other is at 17% and the third is at 14%, paying the first should be your priority. Put as much money towards paying that debt down every month, even paying the minimum on the others, until it’s paid off. Once it’s paid off start with the next and go down the line until all of them are paid off.
Speaking of paying the minimum, it behooves you to always do your best to not do this (unless you’re following the example we just gave). If you’re only paying the minimum on all of your credit cards, the interest alone will take years to pay off.
At the end of the day it all boils down to what you want as opposed to what you really need. The vast majority of things that people purchase are what they want, not what they need. For example, you need food but you want a new pair of jeans. If you can keep that ‘wanting’ in check, and only purchase what you need (besides the very occasional reward) you’ll go far towards controlling your personal debt.