Debt Free Living
Why is it that the average American family is $8,000 in the hole of over a bunch of junk that has long been replaced by newer stuff? Among other reasons, is the invariable avalanche of credit card offers extended to unassuming bystanders minding their daily routines. But this hardly matters to you now. The point is, you are here now and in debt – a position you never envisioned yourself assuming. The real question is what to do to get back to financial order and a solid nights sleep?
First, let’s start by crunching some numbers. Let’s begin with that middle-of-the-road 15% interest rate that you’ve been paying every month to keep the wolves away. If you have $8,000 in credit card debt, you’re throwing an uncomfortable $1,200 in interest a year at meals out that have long since been digested and clothes that you have long since outgrown. If that isn’t depressing enough by itself, remember that the $1,200 is being spent and re-spent on the same items since little has been done to eliminate the debts root cause: the principal. Put another way, if you aren’t sending money above and beyond the minimum payment, you are running on a fiscal treadmill for the bank.
To reverse this undesirable situation, let’s go back to our numbers. If you do what you’ve always been doing, paying only the minimum, it will take you 32 years to get out of debt. From now on, start paying 10% more than the current required minimum on your monthly bill. If your current minimum payment is $160, from now on you should pay $176 each month. At this rate you can hack away at your actual debt and be living completely debt free within five and a half years. If those numbers don’t sound encouraging, you could bump your payment up 30% (to $208), which would have you out of debt in less than five years.
Regardless of what your debt and interest rate happen to be, getting extra money paid down on the principal is the key to the equation. To do this, learn every relevant decimal point relating to your debt well enough to recite in your sleep. Know your rates, when and how they can change, and what the penalties are for paying late. Call your bank about any additional questions you may have about your account.
In the end the issue comes down to a simple act of discipline over further indulgence. Sending extra money to your credit card company won’t be easy. But denying yourself a few luxuries for a short time is far better than living your life as a personal money making factory for already wealthy credit card companies.
