Last week we explored how money grows. Next we’ll look at some ways money vanishes. The largest is consumer debt.
What is it?
Consumer debt includes all outstanding money owed for lifestyle purchases. This includes: credit card debt, car loan debt, educational loans, home mortgages, and other forms of delayed payment. The worst of these is credit card debt.
What does it do?
Consumer debt allows you to purchase what you otherwise may not be able to afford in a one-time payment. However, many find it is easy to over-extend yourself. Having too many upwardly-spiraling debts can quickly undermine your financial stability.
Credit cards are the worst offenders. Unlike other forms of consumer debt the interest rates on credit cards are higher. Debt compounds faster, and none of it is tax-deductible.
Do You Have Too Much Consumer Debt?
If you’re being harassed by credit card collection calls you already know that you’re overextended. But, creditor calls aren’t the only symptom. If you feel persistent anxiety about being able to meet your financial obligations chances are you’re teetering close to the edge.
How Do I Fix Things?
First, determine which expenses can be reduced or eliminated as well as ways to earn more. To make the fastest progress you need to reduce your outgo and increase your inflow. You may find that you need to give up certain luxuries. Short-term pain is better than long-term indebtedness.
Second, apply this money toward paying off your consumer debt. Focus your payment on your most expensive debt. You must be diligent and committed.
Third, as you pay off each debt roll your additional payments to your next debt. Repeat until all are paid. Semi-weekly, weekly, or even more frequent payments can be made online to help shave off additional interest charges.
Fourth, change your behavior. Getting in over your head with debt is often a reflection of spending mindlessly. Aim to spend less than 30% of your take-home pay on debt.
Finally: know you’re not alone. There are many groups of people here at Geezeo who have had, or currently have, problems with too much consumer debt. Work to change your situation and let our community be there to support the changes you make as you become debt-free. Good luck!
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