Paying off your Debt

The average American family with at least one credit card has about $10,000 in credit card deb. Americans seem to live off credit cards which can dig them into debt quickly. Some debt is good and some debt is bad. Good debts would be a mortgage on a home, or college, or car loan. However even though it can be a good debt, don’t borrow more than you can pay back. Shop around for the best interest rates. Bad debt is credit cards. Although credit cards if used wisely can be good for your credit, many people find that they are an easy way to pay for wants in life. It is all too easy to swipe a card for lunch, or maybe a TV you want, however if you can’t pay off your full credit card bill within a month the debt starts stacking up, until you are paying on a card for years. The best way to manage a credit card is to only use it for one or two purchases you can pay off within the next month. When you pay off your card in full you avoid all those interest charges you would’ve paid otherwise. If you are planning on purchasing a big purchase such as a new TV, save up over a few weeks or months until you can pay for it. Charge the big purchase on your credit card, and then pay it off in full when your bill arrives. Never get stuck paying the minimum on credit cards, the minimum will barely cover your interest charges and you will forever be paying off your credit cards. Make sure when paying off your debt to pay off your highest interest accounts first (well above the minimum), while you pay at least the minimum on your lesser interest accounts. Make sure you are allotting 15% of your monthly income towards your debt. Once your debt is paid off, use your credit cards very wisely so they don’t become debt again. Use the 15% that was going towards debt and put it towards savings or investing the money another way. I will go over ways to invest your money another time but you can look into savings bonds, stocks, and mutual funds. Hopefully you will all be out of debt soon and then you can look forward to your well invested retirements.