Get Out Of Debt. Now.
Americans are drowning in credit card debt. In fact, total revolving debt has never been higher.
Never ever is a long time.
2023 is almost here and there is never a better time to kick your consumer debt than today.
I am motivated to write this post because I was recently informed that someone I know is over $50,000 in credit card debt!
Knowing that about someone I like really bums me out. The current average credit card interest rate is 19.23 percent!
Doing some quick math, that amounts to over $800 a month just in interest service payments on that debt. Getting out from under this debt load requires a serious percentage of take home pay just to clear the accrued interest.
I have covered debt solutions before, but I want to layout a quick, bullet point plan for attacking this $50,000 in debt. This would apply to any collection of debts.
Let’s dig in…
I will cover the importance of an emergency fund in the near future, but that get us number 1.
- Save $1,000 if you are a renter, $2,500 if you are a homeowner. This allows you to avoid going further into debt should encounter an unexpected car or home repair.
2. Cut up the card in question. Add any other credit cards to the shred pile.
Stop borrowing.
3. Pause all investing, don’t eat at restaurants. You are too broke now to do either.
4. Here we are talking about $50,000 in total debt. Put all income not used for housing, food and utilities toward the debt. This is a debt emergency.
If you have more than one debt, list them out.
Divide the total balance of each debt by their respective minimum payment.
If your resulting number is under 50, this is an inefficient loan and should be paid off first. The lower the number, the more inefficient it is.
Throw everything you can at it.
If the result is over 50, you can make minimum payments until you pay off the less efficient loans.
This is all about recovering cash flow as quickly as possible.
5. Stop borrowing to consume.
Debt for things like homes works well. Most people cannot buy a home with cash, and real estate is the most proven asset class in history.
Cars, clothes, toys, stuff. All bad uses for debt. Things that go to zero should not be bought with debt.
This simple truth needs to be accepted to avoid the trap of consumerism.
This five point plan can get you out of debt and onto savings and investing for the future.
Thanks for reading. Be good stewards of your earnings.